The tax burden rate in South Korea, which reflects the ratio of national and local taxes to nominal GDP, has reportedly rebounded to approximately 18.4% last year after three years of decline under the current Yoon Suk-yeol administration. However, this figure is still notably lower than the average tax burden rate of around 25% in OECD countries and insufficient to cover increasing fiscal pressures brought on by factors such as low birth rates and aging demographics. The rise in tax burden is attributed to improvements in corporate performances, particularly in the semiconductor sector, and increases in labor income tax due to higher employment and wages.

Historically, the tax burden rate dropped to a low of 16.3% in 2013 as a result of tax cuts during the Lee Myung-bak administration but has varied since then with slight increases during the Park Geun-hye and Moon Jae-in governments. Under the Yoon administration, tax cuts have associated with worsened corporate earnings led to projections of further declines in the tax burden rate for 2023 (19.0%) and 2024 (17.6%). The rebound in tax burden last year was aided by corporate tax increases and proposed labor income tax increases, and with economic recovery expected this year, an increase in tax revenue is also anticipated.

The pressing need for the government to increase the tax burden stems from rising public expenditure requirements against a backdrop of stagnant revenue growth. If these fiscal pressures are not addressed by increasing the tax burden, it is likely to lead to increased national debt, projected to rise significantly by 2029. To ensure long-term fiscal sustainability, the government must actively pursue tax reforms that elevate the tax burden rate, ultimately leading to greater financial obligations for citizens and businesses alike.