"Full tax-credit threshold for Hometown Love donations should rise from KRW 100,000 to KRW 200,000"

[Financial News]  A proposal has been made to raise the full tax-credit threshold for Hometown Love donations from the current KRW 100,000 to KRW 200,000. The proposal is based on the fact that 98.4% of all donations last year were KRW 100,000 or less, making them eligible for a full tax credit. It also cited the 14.5% year-on-year decline in first-half fundraising, despite the tax credit rate for donations exceeding KRW 100,000 and up to KRW 200,000 being raised from 16.5% to 44% this year.
The Sustainable Tourism Local Governments Council held a forum at the National Assembly of the Republic of Korea on the 28th to discuss ways to revise the full tax-credit threshold for Hometown Love donations and considered raising it to KRW 200,000. Lawmakers, officials from the Ministry of the Interior and Safety, local government representatives and academics attended.
According to the council, nationwide Hometown Love donations totaled KRW 151.56 billion last year, up 72.4% from the previous year. The share of donations of KRW 100,000 or less rose from 83.9% in 2023 to 90.9% in 2024 and 98.4% last year.
Starting this year, the tax credit rate for donations exceeding KRW 100,000 and up to KRW 200,000 was raised from 16.5% to 44%. Nationwide fundraising from January through June totaled KRW 29.81 billion, down 14.5% from KRW 34.88 billion during the same period last year. The average donation per transaction also fell 12.4%, from KRW 127,824 to KRW 112,018.
The council argued that the full tax-credit threshold itself should be raised, rather than simply adjusting the tax credit rate. However, 62.5% of last year's annual fundraising was concentrated in November and December, making it too early to assess the impact of this year's tax credit increase based solely on first-half results.
Kim Bo-ra, mayor of Anseong, Gyeonggi Province, said, "When the burden on donors rises sharply the moment a donation exceeds KRW 100,000, the message delivered to them is that 'donating KRW 100,000 is still the most rational choice.'" She called for the full tax-credit threshold to be raised to KRW 200,000.
The council also presented estimates of the additional funds that could be raised if the threshold were increased. Based on last year's fundraising results, it estimated that approximately KRW 45.5 billion more could be collected if 30% of existing donors each contributed an additional KRW 100,000. If every donor contributed an additional KRW 100,000, the maximum additional fundraising was calculated at KRW 151.5 billion. However, this is a simple estimate based on the assumption that existing donors would actually give an additional KRW 100,000 in response to expanded tax benefits.
The forum also introduced examples of local governments using Hometown Love donations. Buan County, North Jeolla Province, raised KRW 1.007 billion last year, exceeding its target of KRW 1 billion. The designated donation project "Please Protect the Bees," aimed at protecting wild bees, initially set a three-year target of KRW 300 million but reached that goal in just one year. Kwon Ik-hyun, governor of Buan County, explained that the county is turning Hometown Love donations into "an experience that connects people and regions rather than simply a donation."
Jung District, Daejeon, said it had raised a cumulative KRW 4.82 billion through August this year from 48,714 donations. Kim Je-seon, head of Jung District, called for the full tax-credit threshold to be raised, saying, "The Hometown Love Fund, a representative source of autonomous revenue, is trapped behind the 'KRW 100,000 wall.'"
Park Jeong-hyun, a lawmaker from the Democratic Party of Korea, also stressed, "We tried partially adjusting the tax deduction range, but that was insufficient to bring about a fundamental change in the flow of donations. It is time to seriously discuss raising the full tax-credit cap itself."
MOIS also expressed its intention to consult with the fiscal authorities on raising the full tax-credit threshold. Park Yu-jeong, head of the ministry's Balanced Regional Development Promotion Division, said, "Raising the full tax-credit threshold for Hometown Love donations to KRW 200,000 is something MOIS also wants. Since a related bill has already been introduced, we will actively consult with the fiscal authorities and work to ensure that it is successfully implemented."
After the forum, the council held a press conference at the National Assembly of the Republic of Korea and called on the legislature and government to amend the Restriction of Special Taxation Act during this year's regular session, raising the full tax-credit threshold to KRW 200,000. It also called for legal foundations to be established for designated donations and disaster relief fundraising, as well as greater autonomy for local governments in managing their Hometown Love Funds.
[email protected] Lee Bo-mi Reporter