Gov't urged to make tax codes biz-friendly

By Lee Hyo-sik

The Korea Chamber of Commerce and Industry (KCCI) has called on the government to make the tax codes friendlier to businesses when it comes to expansion of investment and hiring.

The association, which advocates the interests of more than 140,000 small and large businesses, said Tuesday that policymakers should ease the tax burden on companies engaging in mergers and acquisitions (M&As) abroad.

The KCCI also wants the government to offer larger tax breaks to businesses that increase outbound shipments, expand research activities and spend more on social welfare programs.

Around this time of the year, the association makes dozens of proposals to the Ministry of Strategy and Finance before the latter announces a set of changes to the country’s tax codes. The move is aimed at influencing the ministry to make the tax rules more business-friendly.

“The business circle wants the government to create a more corporate-friendly tax environment, encouraging businesses to invest more and hire more workers,” said Jeon Su-bong, head of the KCCI’s research division. “We hope that the ministry gives a great deal of consideration to our proposals when revising tax codes in the latter half of the year.”

The KCCI said the government should not tax overseas income earned by local companies if it wants to promote Korean firms’ acquisition of foreign entities.

“Most OECD countries do not impose taxes on overseas corporate earnings,” a KCCI official said. “In contrast, Korea adds what companies earn abroad to their domestic income, and deducts part of the taxes that companies paid abroad from taxable income. This forces Korean firms to pay more taxes on overseas income than their foreign counterparts.”

The KCCI also suggested that the government stop collecting a 10 percent valued-added tax on imported raw materials used for the manufacturing of a wide range of export items.

“The government currently imposes value-added taxes on imported raw materials from companies at the time of importation,” he said. “About 40 to 70 days later, companies get part of the taxes back. Businesses want the government to stop collecting the tax at the time of import, and instead balance the tax payment against reimbursement at a later time.”

The KCCI is also asking policymakers to continue a deduction program, which will expire in December, through which businesses deduct expenses they spent to build or expand workers’ welfare facilities.

“We want the government to allow companies to deduct larger amounts of donations made to social welfare organizations from their taxable income. This will encourage businesses to give more back to society,” the official said.