By Lee Hyo-sik
The Federation of Korean Industries (FKI) is calling on the government to revise the country's tax code, which it claims has been discouraging businesses from expanding investment and hiring workers.
The lobby group for Korea's family controlled conglomerates said Monday that it made an official proposal to the Ministry of Strategy and Finance on April 21, asking it to overhaul eight tax articles to make them more business-friendly.
The FKI's move comes a month before the ministry unveils how it will revise Korea's tax system for 2016.
The eight are taxes on "excessive" corporate cash reserves, investment tax deductions, research and development tax credits, minimum taxes, foreign tax payment credits, dividend income, surtax and local tax reduction.
The FKI argued that the government has made these less corporate-friendly by shrinking or abolishing tax incentives for businesses in order to collect more taxes. This has placed a heavy financial burden on companies, it said.
"These tax articles, which were all revised or established in 2014, have significantly increased the corporate tax burden," an FKI spokesman said. "If companies feel a greater tax burden, they tend to shrink investment and employ fewer workers, which will not help boost the sagging local economy."
Among others, imposing tax on corporate internal reserves has been the most controversial. The tax, which took effect in April, calls for the National Tax Service to impose a 10 percent tax on excess cash reserves held by big corporations.
The excess cash reserve tax is applied to large businesses, with more than 50 billion won in capital. Around 4,000 businesses are subject to the tax.
The government expects that if businesses give higher wages to employees and dividends to shareholders to avoid the tax, it will help bolter domestic demand.
The tax on excessive corporate cash reserves has drawn not only resistance from business people but skepticism from analysts.
Critics argue that companies need to build up cash reserves to make investments in the future and nurture growth engines.
The Federation of Korean Industries (FKI) is calling on the government to revise the country's tax code, which it claims has been discouraging businesses from expanding investment and hiring workers.
The lobby group for Korea's family controlled conglomerates said Monday that it made an official proposal to the Ministry of Strategy and Finance on April 21, asking it to overhaul eight tax articles to make them more business-friendly.
The FKI's move comes a month before the ministry unveils how it will revise Korea's tax system for 2016.
The eight are taxes on "excessive" corporate cash reserves, investment tax deductions, research and development tax credits, minimum taxes, foreign tax payment credits, dividend income, surtax and local tax reduction.
The FKI argued that the government has made these less corporate-friendly by shrinking or abolishing tax incentives for businesses in order to collect more taxes. This has placed a heavy financial burden on companies, it said.
"These tax articles, which were all revised or established in 2014, have significantly increased the corporate tax burden," an FKI spokesman said. "If companies feel a greater tax burden, they tend to shrink investment and employ fewer workers, which will not help boost the sagging local economy."
Among others, imposing tax on corporate internal reserves has been the most controversial. The tax, which took effect in April, calls for the National Tax Service to impose a 10 percent tax on excess cash reserves held by big corporations.
The excess cash reserve tax is applied to large businesses, with more than 50 billion won in capital. Around 4,000 businesses are subject to the tax.
The government expects that if businesses give higher wages to employees and dividends to shareholders to avoid the tax, it will help bolter domestic demand.
The tax on excessive corporate cash reserves has drawn not only resistance from business people but skepticism from analysts.
Critics argue that companies need to build up cash reserves to make investments in the future and nurture growth engines.
