IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Reforming the Tax System in Korea to Promote Economic Growth and Cope with Rapid Population Ageing

Listed author(s):
  • Randall S. Jones


Registered author(s):

    Korea has one of the lowest tax burdens in the OECD area, reflecting its small public sector. However, rapid population ageing will put upward pressure on government spending. The challenge is to meet the long-run need for greater expenditures and tax revenue while sustaining strong economic growth. A pro-growth tax reform implies relying primarily on consumption taxes for additional revenue. There is also scope for raising personal income tax revenue from its current low level by broadening the base by reducing the exemptions for personal income. The planned cuts in the corporate tax rate should be financed at least in part by reductions in tax expenditures. The broadening of direct tax bases would also help finance an expansion of the earned income tax credit to address widening income inequality. In addition, the local tax system should be simplified and reformed to enhance the autonomy of local governments. Réformer le système fiscal en Corée afin de favoriser la croissance économique et de faire face au rapide vieillissement démographique La Corée est l’un des pays où la charge fiscale est la plus faible dans la zone de l’OCDE, en raison de la petite taille du secteur public. Cependant, le rapide vieillissement démographique va exercer une pression grandissante sur les finances publiques. La difficulté consiste à répondre au besoin à long terme de dépenses publiques et de recettes fiscales accrues tout en soutenant une vigoureuse expansion économique. Pour qu’une réforme fiscale aide à la croissance, elle doit privilégier les impôts sur la consommation comme source de recettes supplémentaires. Il est aussi possible d’augmenter le produit de l’impôt sur le revenu des personnes physiques, actuellement peu élevé, en élargissant l’assiette grâce à une diminution des exonérations. Les réductions prévues du taux d’imposition des sociétés devraient être financées, en partie du moins, par des compressions de dépenses fiscales. L’élargissement des bases d’imposition directe aiderait aussi à financer une extension du crédit d’impôt sur les revenus d’activité afin de remédier aux inégalités croissantes de revenu. Par ailleurs, le système d’impôts locaux devrait être simplifié et réformé afin de renforcer l’autonomie des collectivités territoriales.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 671.

    in new window

    Date of creation: 20 Feb 2009
    Handle: RePEc:oec:ecoaaa:671-en
    Contact details of provider: Postal:
    2 rue Andre Pascal, 75775 Paris Cedex 16

    Phone: 33-(0)-1-45 24 82 00
    Fax: 33-(0)-1-45 24 85 00
    Web page:

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:oec:ecoaaa:671-en. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.