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KMID : 1124020040200030057
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Korean Social Security Studies
2004 Volume.20 No. 3 p.57 ~ p.82
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A long-term forecasting of total tax rate in Korea and its policy implications
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Tchoe Byong-Ho
Nam Sang-Ho
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Abstract
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This paper forecasts the long-term total tax rate(`TXR`) of Korea, where total tax rate includes tax rate and social security contributions, and from which suggests some policy implications. An econometric analysis is introduced to explain the trend of TXR, using OECD countries` data from 1970 to 1977. The coefficients result is applied to calculate the future Korean TXR. The OECD countries are divided by four cases considering the different approaches to welfare state; OECD average, EU 15 average, USA, and Japan. Thus the results will be different according to cases. If Korea follows the historical experiences of OECD average or EU 15 average in the future, TXR would be 39 percent in 2020 and 50 percent in 2050. In the otherwise, if Korea follows Japan or USA`s case, TXR would be 26 to 29 percent in 2020 and 34 to 38 percent in 2050. Finally if Korea takes the middle line among these four cases, TXR would be 35.5 percent in 2020 and 43.6% in 2050. However, when Korea maintain the current public finance and social security system, TXR will be increased to 45 to 47 percent by 2050. Therefore Korea needs some reform actions to make public finance and social security system sustainable if she takes the middle line position toward building welfare state.
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KEYWORD
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total tax rate, social security burden, public finance projection
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