Tax burden for Koreans born after 2000s estimated to double

With a rapidly declining birthrate and aging population driving up welfare spending while tax revenues fall in South Korea, an analysis showed on Tuesday that the tax burden on future generations will be more than double that of the current generation. If the country’s fiscal situation does not improve, it is estimated that generations born after the 2000s will have to pay 40 percent of their lifetime income in taxes, which could potentially spark conflicts between generations to become another social problem.

According to the Korean Economic Association on Tuesday, the country’s leading economists will present a number of papers on the subject at the 2024 Joint Economics Conference to be held on February 1st, 2024.

Chun Young-jun, a professor of economics and finance at Hanyang University, will present research on ‘Fiscal Sustainability Evaluation through Intergenerational Accounting’ at the first plenary session. This research analyzes the lifetime net tax burden (taxes and social insurance premiums minus welfare benefits) for current and future generations. Chun estimated that 13.3 percent of the future added value (gross domestic product, GDP) would be required to pay off the current fiscal deficit and government debt. Making up the difference with taxes, social insurance premiums and contributions in 2025 will require 41.9 percent of total annual taxes.

This burden will primarily be passed on to future generations. If taxes increase in 2025 to repay the national debt, those born after 2000 will have to pay 40 percent of their lifetime income in net taxes. In contrast, those born in the 1950s and 1960s will pay only 10 to 15 percent of their lifetime income in taxes, while those born in the 1970s and 1980s will have a net tax burden of 20 to 40 percent.

“The population is aging at an unprecedentedly fast pace,” Chun noted, stressing that “as generational inequality is expected to increase due to the expected drastic changes in government fiscal structure, it is urgent to explore alternatives to existing fiscal soundness indicators.”