Ministry of Finance and Economy explains tax-break changes

South Korea's Ministry of Finance and Economy on Aug. 5 said tax-break changes in its 2026 reform plan would preserve support for childbirth and environmentally friendly vehicles through fiscal spending.

The ministry said it was addressing questions and concerns over tax-expenditure measures in the 2026 tax reform plan, finalised and announced on Aug. 3 through the Tax System Development Deliberation Committee.

The plan ends individual consumption tax reductions for hybrid vehicles and value-added tax refunds on accommodation services for foreign tourists as part of its tax-exemption and reduction overhaul. It shifts tax credits for childbirth, adoption and marriage to fiscal spending rather than ending government support in those areas, the ministry said.

The ministry said the shift would preserve the purpose of support while seeking greater effectiveness and fairness in delivery, including people unable to benefit from tax relief because they owe no tax.

Specific recipients, levels and methods of financial support will be decided and announced during preparation of the 2027 budget proposal, according to the ministry.

The reform plan also calls for easing income requirements and increasing payments under the Earned Income Tax Credit, alongside an expanded tax credit for monthly rent. Those measures were presented as part of the plan's agenda for supporting livelihoods and local areas while pursuing tax reform, greater taxpayer convenience and a rebound in potential growth.