Deputy Prime Minister Lee Hyeong-il Rejects Claims of Tax Benefits for Freelancers

Deputy Prime Minister and Finance Minister Lee Hyeong-il has refuted claims that "freelancers are getting tax cuts while office workers pay more." In a post on X (formerly Twitter) on Tuesday, Lee said the claims were "not true at all."

The controversy stems from the government's tax reform plan announced in July. The plan includes lowering the tax rate withheld in advance (withholding tax) from the pay of individual business operators, such as freelancers (personal service providers), from 3% to 2%. Including local income tax, the rate falls from 3.3% to 2.2%. The bill is set to take effect next year once passed by the National Assembly.

Personal service income earners are people who provide their knowledge, skills, or labor for compensation without an employment relationship. Freelance instructors, delivery riders, and designated driver services are typical examples. The tax withheld in advance whenever they receive income will decrease. For instance, a freelancer with an annual income of 45 million won would see their income tax withholding drop from 1.35 million won to 900,000 won. Local income tax would also fall from 135,000 won to 90,000 won, reducing total withholding from 1.485 million won to 990,000 won — a decrease of 495,000 won.

Deputy Prime Minister Lee explained that this rate adjustment does not lower freelancers' final tax burden. Given that many cases involved withholding amounts exceeding actual tax liabilities, resulting in refunds, the change is intended to reduce the tax withheld upfront when income is paid. Some online have claimed that the resulting revenue shortfall would be covered by office workers' earned income tax.

Lee said, "This reform adjusts the withholding tax rate that personal service providers, including freelancers, pay in advance when receiving income." He also emphasized that lowering the withholding rate for personal service providers is a system entirely separate from the earned income tax paid by office workers. "This adjustment will not raise office workers' earned income tax rates or withholding amounts, nor is it a system that shifts freelancers' withholding reductions onto office workers," he said.

Lee added, "The government will continue to respond firmly to fake news that distorts the purpose and content of policies, causing unnecessary conflict and misunderstanding."