Gov’t, parliament disagree on attracting foreign workers

[Photo by Yonhap]

The South Korean government has decided to expand the country’s foreign employment permit quota for 2024 to a record 165,000, in a bid to alleviate the chronic labor shortage across all industries in the country.

The government reached the decision during the 40th meeting of the Foreign Workforce Policy Committee on Monday. The figure is up 37.5 percent, or 45,000, from 120,000 in 2023 and is the largest to date.

The employment permit system, introduced in 2004, allows small and medium-sized companies who cannot find domestic workers to hire foreign workers by issuing non-professional employment (E-9) visas and visiting employment (H-2) visas. The committee also decided to permit the employment of foreign workers on E-9 visas in industries with severe labor shortages, such as restaurants, forestry, and mining.

But in contrast to the government’s policy of expanding the foreign workforce in the country, the country’s political circle is moving to eliminate the special flat income tax rate for foreign workers that will expire by the end of 2023.

The Taxation Subcommittee of the National Assembly’s Strategy and Finance Committee discussed extending the sunset clause of the current 19 percent flat income tax rate for foreign workers during its meeting on November 20, but failed to reach a conclusion as members of both the ruling and opposition parties expressed opposition to the move. If this flat tax rate, which is set to expire on December 31, 2023, is not extended, the tax benefit for foreign workers will disappear from 2024.

The flat income tax rate for foreign workers was introduced in 2002 with the aim of attracting highly qualified foreign workers to Korea. The government submitted a bill to the National Assembly to amend the Act on Restriction on Special Cases Concerning Taxation to extend the application period of the tax rate for foreign workers for five years until the end of 2028 and expanding tax exemptions for their salaries with a welfare nature. But with some members of the subcommittee reacting negatively to the deadline extension, the Taxation Subcommittee is expected to decide on the extension after further discussions.

Given that securing high-skilled talent should go hand in hand with attracting low-wage workers via the employment permit system, concerns are growing that reducing tax benefits, which are a “requirement” for securing high-skilled foreign talent, will result in a “half-hearted” policy to attract foreign workers.