The South Korean government plans to exploit the country’s obsession with plastic surgery by extending taxes to popular procedures like lip jobs to help fund spiraling social welfare costs.
The proposed new tax codes slap a 10-percent value added tax (VAT) on procedures like lip augmentation, double-jaw surgery and body hair removal beginning next year, the South Korean Ministry of Finance said yesterday.
Until now, VAT has only been levied on the so-called “big five” treatments — nose jobs, liposuction, facelifts, breast jobs and double-eyelid surgery.
“Our taxes on medical treatments for cosmetic purposes are revised in line with global standards,” the ministry said in a statement, adding that most advanced nations tax all medical treatments performed for aesthetic purposes.
However, few countries can match the per capita spending on cosmetic surgery of South Korea, where one in every five women is estimated to have undergone at least one procedure.
The new code will also impact previously untaxed religious leaders like monks and priests who will face a 4 percent levy on religious honorariums beginning in 2015 after a year-long grace period, the finance ministry said.
The government estimates the changes — once approved by lawmakers — will help reap an additional 2.49 trillion won (US$2.23 billion) in tax revenue over the next five years.
“Our fiscal conditions face a very challenging situation,” South Korean Finance Minister Hyun Oh-seok said.
“The new tax revenues will be used to offer more welfare support for people who need help,” he said.
South Korean President Park Geun-hye, who took office in February, promised a horde of new welfare programs for the poor and the elderly during her presidential campaign.
The export-reliant nation faces an uphill struggle to fund the burgeoning social welfare costs that come with having one of the world’s most rapidly aging populations.
Separately, South Korea’s central bank left its key interest rate steady at 2.5 percent yesterday, because of uncertainty over the US Federal Reserve’s stimulus program and China’s slowing economy.
The Bank of Korea’s largely anticipated decision to leave the rate unchanged for a third straight month came as Seoul economic policymakers cautiously watched for the timing of the rollback of the US stimulus package.
Growing signs of a slowdown in China — the export-reliant South Korea’s largest trading partner — was also a source of concern for Asia’s fourth-largest economy.
The bank unexpectedly shaved its key rate by a quarter percentage point in May, which was the first cut for seven months and aimed at boosting an economy hit by sagging global demand.
South Korea notched up growth of just 2 percent last year, which was the slowest rate in three years — with exports shrinking 1.3 percent.