Quasi-taxes exceed corporate tax revenue

By Choi Sung-jin

The government’s collection of various quasi-taxes, such as surcharges and levies for specific purposes, totaled 45 trillion won ($38.6 billion) last year, exceeding its corporate tax revenue.

According to the finance ministry, domestic businesses paid 44.67 trillion won in quasi-taxes last year, 2.02 trillion won more than the 42.65 trillion won they paid in corporate taxes. Quasi-taxes here include various statutory levies, four major insurance premiums, and some social insurance premiums.

When added by other donations and contributions, including payments to the Youth Employment Fund initiated by President Park Geun-hye earlier in the year, total quasi-taxes will easily surpass 50 trillion won, business associations said.

“Quasi-taxes have been rising steeply in recent years,” said Kim Chang-bae, a fellow at Korea Economic Research Institute, affiliated with the Federation of Korean Industries, a lobby group for family-run conglomerates. “This reduces corporate resources for new investment while sapping industrial vigor.”

Premiums for various social insurances paid by businesses accounted for 70 percent of total quasi-taxes, increasing 2.7 times over the past 10 years to 31.27 trillion won. “If the government expands welfare benefits, these premiums automatically increase regardless of corporate conditions,” Kim said.

Various surcharges, such as those for disposing of industrial waste, also grew from 14.13 trillion won in 2008 to 17.17 trillion won in 2014. According to a Korea Federation of SMEs survey of 300 smaller businesses, their payment of surcharges last year totaled 9.7 million won on average, up 18.7 percent from 2009.

“The government appears tempted to resort to various surcharges, because businesses show less resistance to them than to taxes,” a business executive said. “However, if the authorities call for corporate cooperation whenever financial needs arise, such as holding global sports events, it is little different from raising corporate tax.”