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Results of year-end settlement may dampen consumption

Posted March. 03, 2014 02:46,   


Jeong, a 36-year-old housewife, has decided to cut the allowance for her husband from 500,000 won (468.38 U.S. dollars) to 400,000 won (374.71 dollars) from next month because she found that her husband had to pay about 500,000 won more after the 2013 year-end settlement. Because of interest on a jeonse loan, insurance premiums and food expenses, it has become more difficult to come out of red even if she tightens the purse strings for some time. Jeong said, “It is the first time in four years since we got married that my husband pays additional taxes after the year-end settlement,” adding, “If we should pay more taxes while the monthly salary only inches up, there is no other way but just reducing the spending.”

As the volume of tax returns, which used to be called the “13th month bonus,” decreases and the number of salaried workers who pay additional taxes after the year-end tax adjustment increases, concerns over its impact are mounting. The total amount of taxes that should be paid additionally by salaried workers is estimated to be about two trillion won (1.87 billion dollars). Households that have expected a hefty return may face additional tax payment. Some point out that this may deal a blow to consumption because households are likely to “cut spending” due to the unexpected expenses.

According to the National Tax Service on Sunday, it plans to finish the receipt of applications for the year-end settlement for 2013 earned income from businesses on next Wednesday. Accordingly, most companies will incorporate the results of year-end settlement this month’s pay.

Employees who have already checked the settlement are making complaints about the results. Although the deduction items such as the number of dependents and credit card spending have not changed much from last year, more people face a decrease in tax return or even an additional tax payment.

Min, a 38-year-old salaried worker, said, “I got more deduction last year because my wife quit her job and was included as my dependent. But I am asked to pay 300,000 won (281 dollars) more.”