尹 Under direct instructions… Ministry of Strategy and Finance, who defended the original draft of the ‘Corporate Tax Cut’

The Ministry of Economy and Finance urges the National Assembly to pass a corporate tax reform bill
“We need to simplify the complex 4 step taxation system”
“Wen raises corporate tax, reducing corporate competitiveness”

The government pointed to the fact that the high corporate tax rate raised by the Moon Jae-in administration was one of the factors slowing down the domestic economy. He also argued that Korea’s current corporate tax rate system does not conform to international standards. It is an appeal to pass the corporate tax reform bill presented to the National Assembly as originally proposed by the government, and is interpreted as a sort of ‘war of public opinion’ in order to gain an advantage in last minute negotiations between the ruling and the opposition parties. over the government’s tax reform bill.

On the 13th, the Ministry of Strategy and Finance distributed an unscheduled press release entitled, “Reorganizing the corporate tax system is essential to expand investment and ensure global competitiveness,” and repeatedly emphasized once again the need to reduce corporate tax. One day after President Yoon Seok-yeol directly instructed that “the corporate tax law must be dealt with this time,” the government began defending the original bill.

The Ministry of Economy and Finance said, “Of the 37 member countries of the Organization for Economic Co-operation and Development (OECD), Korea and Costa Rica are the only countries with a 4-level progressive tax rate system or more.” As It is recommended that the corporate tax structure must be reorganized to match the global standard.” As for the reason why 24 countries, including the United States, operate a single tax rate system, he explained that “multi-level progressive tax rates stifle corporate growth and investment.”

The Ministry of Strategy and Finance claimed that South Korea’s competitiveness in corporate tax rates, evaluated by the International School of Management Development (IMD) in Switzerland, dropped from 27th in 2017 to 39th this year after the Moon Jae-in administration instituted the highest corporate. tax rate (25%) in 2018. It was also highlighted that the domestic investment of foreign companies decreased and at the same time, the departure of Korean companies from abroad accelerated.

The Ministry of Strategy and Finance also suggested that Korea’s effective corporate tax rate is higher than that of other developed countries as a basis for lowering corporate tax. Last year, the effective tax rate for all companies (including foreign tax paid) was 18.8%, and the rate for large corporations was 21.9%. As of 2019, the effective tax rate of all companies (including local taxes) was 21.4%, showing a significant gap with the US 14.8%, Japan 18.7%, and the UK 19.8%. The Korea Institute of Public Finance previously analyzed that “the higher the effective tax rate, the lower a company’s competitiveness in the global market.”

In addition, the Ministry of Strategy and Finance said, “Countries around the world are competing by any means and means to attract global companies in strategic industries such as semiconductors and electric vehicles, such as subsidy payments, tax credits, corporate tax breaks , and free land support “We are at a disadvantage in the competition to attract companies because of the tax rate system,” he said.

Reporter Sejong Lee Young-joon