Finance Minister stresses need to reduce corporate tax rate: The DONG-A ILBO

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Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho said during a roundtable with SME managers that there is a need to reform and revise corporate tax rates and the South Korea’s tax system compared to other advanced countries, pointing out a huge “un

A. “Burden imposed on businesses under the Moon Jae-in administration which raised the top corporate tax rate from 22% to 24% and increased corporate tax brackets from three to four.

Over the past five years, countries around the world have tried to cut corporate taxes in an effort to boost business competitiveness, but South Korea went against the grain and raised taxes instead. on companies. As a result, South Korea’s top corporate tax rate increased by 3.5%p compared to the OED average. South Korea’s corporate tax rate is higher than that of major Asian economies such as Japan, Taiwan and Singapore, which hurts the competitiveness of South Korean companies. Unlike many other advanced economies that apply a flat tax rate for corporate tax, South Korea has four tax brackets for corporate tax, which imposes a huge tax burden on large corporations. businesses. As a result, Samsung Electronics paid 2.5 times more corporate taxes than Taiwan’s TSMC and 1.6 times more corporate taxes than US chipmaker Intel. The government has tied a sandbag to domestic companies that need to compete in the global market.

Corporate tax is a key indicator of a country’s business environment. Companies contribute to economic growth through active investment, where tax rates are set appropriately and fair taxation is in place. Under a punitive tax system, however, this virtuous circle cannot take place. An excessive increase in the tax rate discourages companies from hiring and leads them to raise prices. In contrast, a 1 percentage point cut in corporate tax could lead to a 3.6% increase in infrastructure investment.

Amid the slowing engine of economic growth, the current corporate tax system that hurts business competitiveness is unsustainable. The government must quickly overhaul the corporate tax structure, first by significantly lowering corporate tax rates as part of the tax law change due in July, then by proposing measures to streamline the tax brackets in advanced countries.

Some fear that lower corporate tax rates will lead to reduced tax revenues. However, from a medium to long-term perspective, lower tax rates will boost business productivity and contribute to the country’s financial strength. The reduction in the corporate tax rate is a direct incentive to bring offshore companies back into the country. The new government’s economic program must take a bold step to reduce corporate taxes and thus take the first step towards a “private-led economy”.

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