Quasi-taxes paid by Korean companies up 30% in 4 years

[Photo by MK DB]

South Korean individuals and companies saw their quasi-tax payments go up by more than 30 percent over the last four years in 2021 due to a steep rise in the four major insurance fees.

According to a study by the Federation of Korean Industries on Wednesday, broad quasi-taxes amounted to 181.1 trillion won ($136.7 billion) in 2021 and narrow quasi-taxes, mostly covered by businesses, to 77.1 trillion won.

Broad quasi-taxes are all financial burdens, excluding taxes, which must be paid by all Korean taxpayers. Narrow quasi-taxes refer to quasi-taxes that exclude financial burden that later provide compensation or services in return.

Broad quasi-taxes accounted for 39.6 percent of the entire tax revenue of 456.9 trillion won in 2021, up 30.7 percent from 138.6 trillion won in 2017. Narrow quasi-taxes increased by 32.2 percent from 58.3 trillion in 2017. The 2021 figure of 77.1 trillion won was higher than the 70.4 trillion won in corporate taxes in 2021.

The growth rate of quasi-taxes was higher than that of Korea’s gross domestic product, which grew by 12.9 percent, between 2017 and 2022.

One of the major reasons behind the rise in quasi-taxes was the increase in the four major insurance premiums, the FKI noted.

As of 2021, premiums paid for four major types of insurance accounted for 82.4 percent of the broad quasi-taxes.

By type, health insurance premiums accounted for 38.4 percent, national pension payments 28.3 percent, employment insurance premiums 7.5 percent, long-term care insurance premiums for older people 7.5 percent, and industrial accident compensation insurance premiums 3.9 percent.

Compared to 2017, the increase in health insurance premiums gained by 19.1 trillion won in 2021, and the long-term care insurance premiums for older people by 4.5 trillion won.

Among the narrow quasi-taxes, the share of the four major types of insurance paid by companies reached 92.9 percent.

The FKI attributed the surge in the health insurance premiums and long-term care insurance premiums for the elderly to the steady increase in premium rates.

“The continuous rise in quasi-taxes is a large burden on the public, as well as on businesses,” said Choo Gwang-ho, head of the FKI’s economy & industry department. “The pace of the increase in quasi-taxes may need to be curbed.”