Aju Business Daily

SEOUL -- On a special direction from President Moon Jae-in, South Korea's tax agency decided to suspend a regular tax probe into millions of small firms and neighborhood mom and pop stores, which have been hit by slow sales and rising costs caused by a minimum wage hike.

The National Tax Service (NTS) said Thursday it would not conduct tax audits for some 5.19 million "self-employed" shop owners and 500,000 small firms this year and next year. The agency promised not to check their taxation reports, but high-income professions such as real estate leasing, consumer services, doctors and lawyers were excluded.

The NTS move came after Moon called for special tax breaks and incentives to ease the burden of small business owners.

Based on higher tax revenue especially from big corporations and high-income earners, Moon has adopted an expansionary fiscal policy to bankroll his welfare program. The government also hiked the compulsory minimum wage by 16.4 percent to 7,530 won ($6.6) per hour this year and it will rise further by 10.9 percent to 8,350 won next year.

The increase backfired because small firms sacked part-time workers to reduce costs. The maximum weekly work hours were cut from 68 to to 52, but the government agreed to introduce a six-month grace period for the implementation of shorter working hours due to complaints from many companies.