By Kim Hyun-cheol
Seoul finalized a simplified tax incentive program that will guarantee tax reductions for seven years for large foreign investors in the country's free economic zones (FEZs).
The plan was endorsed at an FEZ committee meeting, the Ministry of Knowledge Economy announced Thursday.
Under the new policy, large-scale foreign-invested firms will be free of all taxes for the first five years and 50 percent of them for the next two years.
One Dutch-invested pharmaceutical company, which will be housed in the Incheon FEZ, will be one of the first to benefit, the ministry said.
An exclusive immigration desk will also be installed at local airports at the end of this month for foreign investors in the zones.
The measures were taken as FEZs are looking less attractive to foreign investors than the government had anticipated. FEZs here have consistently been urging more deregulation and incentives within the business area, saying the current system is not efficient enough to entice major foreign investors.
Kim Moon-hee, commissioner of the Busan-Jinhae Free Economic Zone Authority, has said the government should roll out more aggressive incentive packages. He called for offering free land and full tax exemptions for the top 100 global companies wanting to do business inside the zones.
``Offering lower taxes for good is much better than the government's formula,'' Tony Michell, a professor at the Korea Development Institute told The Korea Times during a telephone interview. ``No-tax formulas can't be key to helping Korea compete with Hong Kong and Singapore, as long as they are only for a limited period of time.''
Mark Patton, partner at GCT consulting firm, said that Korea should put more focus on the issue of consistency in policies.
``The question comes down to 'Do investors trust you?''' Patton said. ``The government should be able to ensure them of consistency over time. If the Lee Myung-bak administration starts one policy, and then the next government cuts it, this will turn off many foreign investors.''