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The IMF recommends raising South Korea’s VAT rate and reviewing exemptions to boost revenue amid fiscal imbalances caused by expansive spending promises ahead of the presidential election, noting Korea’s current 10% VAT is below the 18.5% average in advanced economies.
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The proposal was included in a report after the IMF’s 2024 consultations with Korean authorities, urging adjustments to personal income tax deductions and VAT exemptions, which have expanded unlike in many other developed countries.
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Since its introduction in 1977, Korea’s VAT rate has remained unchanged due to concerns about inflation and the impact on low-income households, despite being low compared to global peers.
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The OECD also recommended increasing Korea’s VAT last year; major economies have VAT rates between 19% and 22%, with Korea’s 10% rate lower than all but Canada and Switzerland among OECD members.
Source: pulse.mk.co.kr
