South Korea’s finance ministry on Tuesday renewed calls for corporate tax reform, with a focus on simplifying the tax system and cutting taxes for large companies, amid heightened tensions in parliament over the passage of a bill.
The government and the ruling People’s Power Party are pushing to lower the top tax rate to 22% to attract more investment to South Korea, but the main opposition party has decided that more than 300 billion won ($230 million) in revenue to maintain the current tax rate of 25%. ).
South Korea currently applies four different tax rates ranging from 10% to 25%. The government plans to simplify the bracket to 3 and lower the cap to 22%.
“Even international organizations such as the IMF and OECD are advising companies to lower their top tax rates and simplify their tax bases,” the Ministry of Economy and Finance said in a statement, referring to the International Monetary Fund and international organizations. economic cooperation and development.
“Of the OECD countries, 24, including the United States, have only one tax rate, and 11, including Australia, have two tax rates,” the ministry said. “Only South Korea and Costa Rica are in the 4 bracket.” I have a system.”
The ministry said major countries are simplifying corporate taxes because multiple tiers of progressive tax rates impede growth and investment and induce businesses to seek unnecessary divisions to avoid tax increases, the ministry said.
The ministry added that South Korea’s top corporate tax rate is already above the OECD average of 21.2%, while Asian rivals such as Hong Kong and Singapore hold comparable figures of 16.5% and 17%.
“Amid the restructuring of global supply chains, countries are striving to attract global firms in strategic industries such as chips and electric vehicles by offering subsidies, tax breaks, corporate tax cuts and free land leases. We will spare no effort,” the ministry said.
He added that the proposed tax reform would help local businesses compete with their foreign rivals on a “level playing field”.
South Korea collected KRW 99.8 trillion in corporate tax in the first 10 months of this year, an increase of 48.4% year-on-year, on the back of improving corporate earnings.
The total corporate tax in 2021 will be 70.4 trillion won, up 26.8% from the previous year. According to market data, Samsung Electronics paid 13.4 trillion won in corporate taxes, up 35.3 percent from the previous year.
Hyundai Motor, the country’s top automaker, paid KRW 2.2 trillion in corporate taxes in 2021. This was up significantly from just KRW 168.7 billion tallied a year ago due to improved earnings. (Union).