Middle Class Suffers

Tax Burden Rises While Income Growth Stalls

The life of the middle class is getting difficult here. As living expenses rise, income makes little growth. According to a report by the Bank of Korea (BOK) Friday, during the third quarter of
this year, our gross domestic product grew 1.1 percent over three months, but the gross national income (GNI) stayed flat. The GNI is a gauge showing people's purchasing power. Despite the
increase in economic volume, the quality of people's lives has not improved at all.

The primary responsibility for this worrisome situation lies in the worsening trade situation. The prices of our export items such as semiconductors have been sliding while raw material
prices are skyrocketing. The BOK also attributed the weak GNI growth to the won's gains against the U.S. dollar and the oil price hike. The real trade loss hit an all-time high of 18.8 trillion won during the period, a rise from the loss of 16.8 trillion won in the previous quarter. What makes people gloomy is that there is no prospect of improvement in the foreseeable future. Analysts also see the situation pessimistically.
To make matters worse, rising housing taxes and other property taxes are proving an additional burden, particularly to the middle class. A series of government efforts aimed at restraining spiraling apartment prices, especially those in the Kangnam region, have ended up reducing the disposable income of the middle classes and worsening the quality of their lives.

The steep rise in income tax in recent years is also a factor driving salaried persons into difficulties. The average amount of the tax that stood at 1.3 million won per person four years ago is now nearing about 2 million won. The reduction of income dampens people's zeal for consumption and slows overall economic growth. The worrisome fact is that the worsening trade conditions from the continuing fall of the dollar may reduce our GNI further, making it more difficult for business recovery. What is most urgently needed is to vitalize business activities and increase investment. Expanding a nation's growth potential is the only way to minimize the negative impacts from external conditions. What is needed for the government is to create an atmosphere conducive to attracting investment and speeding up economic growth. That is the only way to vitalize domestic business activities.

Many business corporations are complaining about various administrative restrictions that hamper their investment. The government should not be reluctant in removing all restrictions that serve as a stumbling block in attracting investment before it is too late. .


The Korea Times