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Poor households receive record subsidies

Sept 21,2018
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Korea’s tax agency said that assistance given to low-income households this year, including childcare subsidies, reached an all-time record of 1.75 trillion won ($1.56 billion).

According to the National Tax Service on Thursday, 1.7 million households, which is 130,000 more than a year ago, received the earned income tax credit this year, while 900,000 families, 130,000 fewer than last year, received the government’s childcare subsidy. An estimated 390,000 households received both subsidies.

When the families that received both the earned income tax credit and the childcare subsidy are excluded from the count, the number of households receiving subsidies is 2.21 million, which is 2.8 percent more than the 2.15 million that received them a year ago. Last year, these households received a total of 1.68 trillion won in subsidies.

Korea was the first country in Asia to introduce an earned income tax credit in 2009. It is aimed at helping those who work but still struggle to get by due to their low incomes.

The number of people receiving the earned income tax credit has grown compared to the previous year largely due to the easing of the requirements for the credit.

Until last year, singles applying for the tax credit had to be older than 40 years old, while starting this year that age has changed to 30.

Singles older than 30 qualify for the earned income tax credit if they have an annual income of less than 13 million won. For families with one breadwinner, they must make less than 21 million won a year to qualify. For dual-income families, their total income has to be less than 25 million won. There are no age limits on the credit for families.

The government gives a maximum of 850,000 won a year to singles, 2 million won for single-income households and 2.5 million won for dual-income families.

The number of families receiving childcare subsidies fell due to Korea’s shrinking birthrate. According to the NTS, the number of households raising children fell from 5.57 million last year to 5.43 million this year.

The government gives a maximum of 500,000 won a year per child in subsidies. A family’s annual income must less than 40 million won a year to qualify.

The person receiving the earned income tax credit must have a net worth of less than 140 million won, while for the child care subsidy it needs to be less than 200 million won. This includes real estate and other assets, such as cars and financial investments.

“We have enhanced the application convenience so that those eligible for the subsidies can easily apply,” said Park Suk-hyun, head of the earned income tax bureau at the NTS.


BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]