Expenses of Growth
The household income-to-GNI ratio is dropping more rapidly in Korea than in the other OECD member countries, whereas the pace of the growth of the corporate income-to-GNI ratio is quadruple the OECD average.
According to the National Assembly Budget Office, the ratio of household income to gross national income fell from 70.6 to 62.3 percent in Korea between 1995 and 2012. During the period, the OECD average dropped just 4.2 percentage points from 71.9 percent. The office explained that the OECD average is the average of 20 of the member countries where the data is available for each of the 17 years.
The household income-to-GNI ratio as of the end of 2012 was between 66.6 percent and 77.5 percent in the G7 countries excluding Canada. The ratio fell by 1.2 to 8.9 percentage points in the G7 countries during the period with the only exception of the U.K., where the percentage rose by one percentage point.
Meanwhile, Korea’s corporate income-to-GNI ratio increased from 16.6 percent to 23.3 percent. The rate of increase was limited to 1.6 percentage points, from 16.6 percent to 18.2 percent, in the OECD member countries.
The percentage of 23.3 percent is second only to that of Japan at 23.7 percent when compared to those of G7. The others’ ratios ranged from 11.9 percent to 16.3 percent. During the 17-year period, the household and corporate income increased by 6.2 and 9.1 percentage points each in Korea, while the corporate income grew only 1.2 times faster than the household income in the other OECD countries.
“The trend of household income having a decreasing ratio to GNI, unlike corporate income, is common to OECD countries, but the drop is much faster in Korea,” the office commented. Under the circumstances, the Korean government is planning to submit a revised tax bill to the National Assembly during the current regular session. The revision is characterized by policy measures to ensure the flow of corporate income to the household sector by means of fewer taxes on earned income and dividend income and more taxation on corporate income.