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More pensioners pay income tax

But the number of complaints about the scheme is on the rise
May 15,2018
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As the number of national pension recipients that have to pay income tax increases, so does the number of complaints.

According to the Ministry of Health and Welfare and the National Pension Service, last year 11,670 people paid taxes on the pension they received. Although that only accounts for 0.3 percent of the 3.7 million pensioners, the figure has grown considerably since three recipients were taxed for the first time in 2013.

Last year marked the first time that more than 10,000 people had to pay income tax on their pension. This year the number is expected to double, and that number will continue to climb steadily as more than 300,000 additional people start claiming a pension every year.

Last year recipients on average paid 22,380 won ($20.94) in income taxes. While most taxable pensioners were paying between 20,000 won and 30,000 won, the highest tax bill amounted to 110,000 won while the smallest amount was 1,000 won.

Until 2001, the government did not impose taxes on any form of pension payment, government or private.

In 2002 the government started to tax public servants, including military retirees and school teachers, that received between 2 million and 3 million won a month.

It wasn’t until 2013 that national pension recipients began to get taxed.

Those that receive more than 7.7 million won a year, or roughly 640,000 won a month, are taxed at a rate between 6 and 42 percent.

“The national pension payment happens to be the main income source of many people that are retired,” said Jung Choun-sook, a Democratic Party lawmaker. “It’s too harsh to tax on an income that’s less than 1 million won a month.”

The lawmaker said the taxable income should be raised from 7.7 million won a year.

The situation is even worse for those that see their pension return cut.

Pensioners that make more than 2.26 million won a month can have a maximum of 50 percent of their pension return cut. Last year, roughly 50,000 people saw their pension cut because their income was too high. There are even those that not only saw their pension cut but also had to pay taxes.

“As the number of people getting a larger pension increases compared to the past, we expect the number of people seeing losses to grow as well,” said a ministry official. “It’s time that we consider either lowering taxes or completely erasing the system of cutting pension payments.”

Some accounts suggest the government should either provide benefits like tax returns on the income-taxed pensions or create a separate taxation for pension that has a lower rate than that of income tax.


BY SHIN SANG-SHIK [lee.hojeong@joongang.co.kr]