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| gettyimagesbank |
By Kim Tae-ho
A single mother, who had to entrust the care of her two kids to their grandmother, could hardly make a living despite working late nights. Supporting her daughter's dream of becoming a composer by giving her piano lessons was a luxury she could not afford. However, things took a positive turn when she received her tax credit, which enabled her to buy a used piano and sign her child up for music lessons.
A young man was barely making ends meet by working part-time and struggled to find a more stable job due to his lack of work experience. Fortunately, the tax credit enabled him to attend night classes and earn qualifications. He finally succeeded in landing a job at an e-commerce company that he had wished to work for.
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| Kim Tae-ho, vice commissioner of the National Tax Service |
The NTS administers the EITC and CTC, designed to aid low-income taxpayers in employment. It may seem strange that the revenue authority, whose primary function is to collect taxes to finance government spending, is also responsible for providing welfare support. However, a closer look at the nature of the program reveals that the NTS, with its vast income data, is well-suited for the task.
The EITC is a financial assistance program for households whose income from employment, business activities or service as religious clergy is below a threshold. The credit amount is designed to increase with the rise in income, encouraging families to work while helping them sustain their livelihoods. The CTC program also uses income data to provide assistance to families raising children under 18 with limited means.
When the program started in 2009, the total amount disbursed was just 453.7 billion won ($342 million), benefiting about 590,000 households. Over the years, the program has expanded to cover a larger population and provide higher credit amounts. Just last year, 4.99 million households, or one out of every five families, received 4.98 trillion won in credits. It is clear that the EITC and CTC programs have become vital welfare benefits in Korea.
The reach of these programs has been expanding. This year, the household asset threshold for eligibility has been increased from under 200 million won to under 240 million won. The EITC ceiling has also been raised by 10 percent, up to 1.65 million won for single-person households, 2.85 million won for single-earner households, and 3.3 million won for dual-earner households. Additionally, the maximum CTC has been increased by 100,000 won to 800,000 won per dependent child. These changes are expected to add around 700,000 households and 1.1 trillion won in disbursements compared to the previous year, meaning that a total of 5.69 million families will receive 6.08 trillion won in combined support.
The NTS has also improved processes to enable taxpayers to claim their EITC and CTC electronically through the Hometax mobile app or website, or by following the instructions provided by the automated response system (ARS) over the phone. As a result, 99.8 percent of claims are now filed electronically.
Last year, a taskforce was formed to develop ideas for improving access to the tax credit program. One of the initiatives implemented was the automated claims process for senior citizens and those with severe disabilities. The authentication process was also simplified for taxpayers to view mobile notifications, and claims decision letters are now sent directly to the claimant's mobile device, eliminating the risk of lost mail and ensuring privacy.
The NTS is dedicated to expanding the reach of the programs and services that prioritize welfare as we understand the importance of strengthening a robust and finely knit safety net for society's most vulnerable and marginalized populations. Our income and asset data enable identifying and informing those who are eligible to claim their tax credits. We also strive to streamline our workflow to expedite the review and disbursement of credits.
The expanded EITC and CTC programs will hopefully provide much-needed relief to families who work hard but make only a small income. The NTS will support and empower these families, helping them to maintain their hope and courage as they work towards achieving their dreams.
The writer is the vice commissioner of the National Tax Service.
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