With legislation, religious workers’ tax-free ride may end in 2018

Posted on : 2015-12-01 16:45 KST Modified on : 2015-12-01 16:45 KST
In an apparent concession, religious workers would still pay far less income tax than regular earners
Pastors getting fabulously rich off untaxed ‘invisible benefits’
Pastors getting fabulously rich off untaxed ‘invisible benefits’

The National Assembly Strategy and Finance Committee agreed on new legislation on Nov. 30 that would assess taxes on pastors, priests, Buddhist monks, and other religious workers as of 2018.

The administration previously presented a bill for taxing religious workers to the National Assembly in 2013, but the legislation, which was intended to “eliminate a blind spot in tax law,” ended up delayed for two years over objections from politicians. The amendment agreed upon this week adds another two-year grace period before full-scale implementation.

The change could be a concession to religious voters ahead of next April’s parliamentary elections and the Dec. 2017 presidential election, with proponents of tax justice and taxing all forms of income proving vulnerable to pressure from the religious community.

At a plenary session on Nov. 30, the Strategy and Finance Committee approved an amendment to the Income Tax Act that would generally maintain the government‘s suggested tax plan for religious workers, but delay its implementation for two years until 2018.

The final steps before full implementation involve passage by the Legislation and Judiciary Committee (LJC) and the Assembly’s plenary session.

While religious workers have not been explicitly exempted from taxes in the past, they have not paid as a matter of practice. No religious income has been taxed in the 47 years since a failed 1968 attempt by the National Tax Agency to charge earned income tax on religious workers.

The legislation approved by the Strategy and Finance Committee would create a new category of “religious income” in the miscellaneous income category of the Income Tax Act. The establishment of a separate basis for taxing a particular profession is highly unusual. Food and transportation funds received from religious groups would not be taxable, and up to 80% of income for those earning 40 million won (US$34,500) or less a year would be exempted as necessary expenses. A religious worker earning 40 million won would thus only be charged taxes on eight million won (US$6,900) of it, after 80% (32 million won) was deducted as necessary expenses.

The percentage of expenses regarded as “necessary” falls to 60% for those earning between 40 million and 80 million won (US$34,500-68,900), 40% for those earning 80 million to 150 million won (US$68,900-129,200), and 20% for those earning over 150 million won. As with income tax, the rate will be 6-38% according on income bracket.

Religious groups would be free to deduct tax payments every month. Those that do would receive collective processing by the National Tax Agency, while workers would be able to report their earnings individually in other cases, as with the self-employed.

The reliance on individual reporting raises the possibility of tax evasion. The new tax law would require submission only of data related to religious workers’ individual income for NTA auditing purposes.

The legislation is still expected to face charges of unfairness, as it offers substantially higher benefits to religious workers compared to those with regular earned income. Figures from the Korea Taxpayers’ Association (KTA) show that a religious worker earning 80 million won a year would only have to pay 1.25 million won (US$1,080) in income tax, compared to 7.17 million won (US$6,180) - nearly six times higher - for an ordinary worker with the same income.

“Even if this legislation does pass, religious workers would still be paying far less in taxes than ordinary earners. And even that is being deferred - there’s too much special treatment,” said KTA chairperson Kim Seon-taek said.

“This isn’t the feudal era. I‘m not sure why politicians are letting themselves get pushed around by religious workers like this,” Kim continued. “Are ordinary workers going to feel like paying their taxes after this?”

By Kim So-youn and Hwang Jun-beom, staff reporters

Please direct questions or comments to [english@hani.co.kr]

 

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