Tax system measures to cope with low birth rate and aging population

Korea is entering an aging and super-aging society faster than Japan, and our society is approaching a super-aged society, and the population has been decreasing since 2020. While social security costs are increasing due to low birth rates and aging population, population decline can lead to a decrease in tax revenue. Based on the Basic Plan for Low Fertility and Aging under the Framework Act on Low Fertility and Aging, Korea has increased every year, starting with 2.1 trillion won in 2006, with 51.7 trillion won in 2022, 48.2 trillion won in 2023, 15 trillion won in 2024, and 19.7 trillion won in 2025. However, the budget under the Act has been extremely low in practical use for marriage, childbirth and child rearing support, while Japan has used 66 trillion yen for 30 years to support marriage, childbirth, child rearing, and single-family coexistence. Japan has a budget of 4.2 trillion yen for ultra-low birth control, which includes support for both single and single families in 2025. As part of the 2010 tax and social security reform, Japan has been preparing a tax support system, focusing on low birth rate measures rather than aging measures. Japan’s income tax law, corporate tax law, local tax law, tax special measures law, expansion of child allowances, expansion of support deductions and rationalization of basic deductions, special tax credits for housing loans, special tax credits for specific housing renovations and income taxes for life insurance premiums, special tax credits for corporate taxes for supporting both family and women’s activities, introduction of a tax system for settlement of inheritance of taxpayers, exemption from gift taxes for marriage and childcare funds, non-taxation of gift taxes for education funds and housing acquisition funds, financial resources through rational reorganization of the consumption tax system, reduction of fixed asset taxes and urban planning taxes on residential assets for the elderly, reduction of fixed asset taxes on barrier-free renovation projects for the elderly, and exemption of fixed asset taxes on assets for child welfare facilities and social welfare services. Korea’s income tax system focuses on housing stability for ordinary people and supporting economic life for low-income people rather than a tax system to cope with the aging of low birth rates, but responds to low birth rates through tax support by exempting acquisition taxes for housing for the purpose of living with children, establishing a marriage birth gift property system and a marriage tax credit system in 2024, and introducing tax-free childbirth support. Discuss the tax support system in response to Japan’s low birth rate and aging population and derive problems of Korea’s tax support system. In addition, the government will review the legal issues to reform the tax law to cope with the low birth rate and aging population, rationalize income and tax deductions under the Income Tax Act, rationalize income tax and local income tax support for the acquisition of married child-rearing housing, rationalize taxation of pension income in an aging society, and raise funds for the low birth rate and aging population.