The government will provide greater tax reductions and financial support for service businesses to get rid of what it called its own "discrimination" against the industry, the finance ministry said Friday.
Korea's service industry accounted for nearly 58 percent of the country's total gross domestic product and over 68 percent of total employment in 2010, one year after the government said it was shifting its focus from the manufacturing sector to service businesses.
However, the government's support for companies continues to focus on manufacturing businesses.
"During the process of economic development, the service industry has been comparatively discriminated against due to government policies on the taxation system, financial support, employment and infrastructure that focused on manufacturing businesses," the Ministry of Strategy and Finance said in a press release.
"The government has worked to remove the distinction between government policies for manufacturing and service businesses, but such a distinction still exists."
Currently, all manufacturing firms, regardless of their size or product, are subject to preferential tax rates, while only a handful of service businesses that have been labeled knowledge-based are subject to tax reductions.
A large gap also exists in the amount of money each industry receives in government support.
In 2011, 53.8 percent of all manufacturing companies received some type of financial support from the government, while only 10.8 percent of service businesses enjoyed such support, according to the ministry.
Also, the government spent less than 1 percent or some 64 billion won ($56.6 million) of 16 trillion won earmarked for research and development (R&D) this year.
To eradicate such a gap in government support for the service industry, the ministry said, it will expand government R&D fund for the industry to over 70 billion won in 2013 while also expanding the type of service businesses subject to tax reductions.
In addition, the government will set up a new 140 billion won fund to support the cultural contents industry.
Such measures were reviewed and approved at a crisis management meeting attended by Finance Minister Bahk Jae-wan and other related officials. (Yonhap)