South Korea's tax authority has decided to continue imposing education tax on interest income from housing loans for low-income borrowers, such as Didimdol loans, rejecting the financial industry's request for exemption.
According to financial industry and government sources on Wednesday, the Ministry of Economy and Finance is working on establishing new guidelines following its proposed revision to the Education Tax Act enforcement decree announced last month. The guidelines will specify which "interest income and fees from consumer finance loans" will be excluded from the education tax base.
The ministry plans to exclude housing loans such as Didimdol and Beotimmok loans from the tax exemption. "Housing loans are not included among the consumer finance loan products that will be excluded from the tax base," a ministry official said.
When announcing the tax law enforcement decree revision last month, the ministry said it would exclude "interest income and fees from consumer finance loans" from the education tax base. Specific examples cited included Haetsallon Bank, Haetsallon Card, and Worker's Haetsallon products. The measure aimed to reduce the tax burden on financial institutions that expanded consumer finance products for financial inclusion purposes.
In response, the financial industry reportedly proposed to the ministry that policy housing loan products primarily used by low-income households, such as Didimdol loans, should also be exempt from the tax base. Didimdol loans support married couples with combined annual income of 60 million won or less purchasing homes valued at 600 million won or below. However, the ministry maintains a cautious stance on excluding such housing loan products from the tax base.
Industry observers interpret this as aligned with the government's stance on curbing household debt. The Financial Services Commission previously announced plans to manage this year's household loan growth rate below last year's 1.8%. Financial authorities are also considering including policy mortgage products in debt service ratio regulations over the medium to long term. "The interest income from policy mortgage products is actually not that large," one financial industry official noted, adding that "the symbolic significance of household debt management appears to have been reflected in the education tax base decision as well."