'Money earned vs. money invested': Labor groups decry unfair tax burden on wage earners

Labor and civic groups called Tuesday for a sweeping overhaul of South Korea's income tax system to close gaps in the taxation of asset income and improve overall tax equity. They argued the current framework, which centers on taxing labor income, must be broadened to comprehensively cover assets and capital income.

The Federation of Korean Trade Unions (FKTU) co-hosted a forum titled "Normalizing Asset Taxation ①: Gaps in Asset Income Taxation and the Shift to a Comprehensive Income Tax System" at the National Assembly Members' Office Building on Tuesday, alongside lawmakers Kim Young-hwan, Yun Jong-o, Cha Gyu-geun and Han Chang-min, People's Solidarity for Participatory Democracy, and the Korean Confederation of Trade Unions (KCTU). The forum was organized ahead of the government's expected announcement of a tax reform plan to review the current asset taxation framework.

Kim Hyeon-dong, a professor of business administration at Pai Chai University, presented the keynote, arguing that the current income tax law relies on an enumerated "source of income" approach that fails to capture new types of income. "The source-of-income theory creates taxation gaps and tax equity problems," Kim said. "There is a need to incorporate the net wealth accretion theory — which taxes based on economic capacity — into the income tax system."

The net wealth accretion theory treats any increase in a taxpayer's net assets over a given period as taxable income. Kim said the approach can enhance tax neutrality and equity by allowing taxation regardless of the source or form of income. However, he added that sufficient review is needed given potential constitutional concerns, including the principle of statutory taxation and the prohibition on blanket legislative delegation.

Park Ki-baek, a professor at the University of Seoul who participated as a discussant, agreed with the direction of adopting the net wealth accretion theory but said detailed system design would be necessary. He proposed, among other options, creating a new "other net wealth accretion income" category within the existing income tax framework without significantly disrupting the current structure. Moon Seong-hun, a professor at Hallym University, said a comprehensive review was needed covering the relationship between income tax and inheritance and gift taxes, the timing of taxation, and the treatment of gains and losses.

Labor groups said strengthening the taxation of asset income is essential to improving tax equity. Park Ki-san, director of the FKTU's Policy Division 1, said the current income system "does not properly reflect the changed realities of labor, including platform workers and freelancers," and that "capital income is taxed more leniently than labor income." He added that the net wealth accretion perspective should be adopted more actively to strengthen taxation on capital and asset income.