Kim Hyun-bin began his journalism career at Arirang TV from 2012 to 2017, specializing in defense, foreign affairs and the economy. In 2018, he joined The Korea Times, covering society and business, and is currently responsible for embassy affairs.
Lobby groups call for tax cut to increase investments, employment
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By Kim Hyun-bin
By Kim Hyun-bin
Six major business lobby groups submitted a request to the National Assembly for the swift passage of a pending corporate tax reduction bill so that companies can better respond to the expected economic downturn next year, according to the business community, Monday.
The six lobby groups ― the Korea Chamber of Commerce and Industry (KCCI), Korea Enterprises Federation (KEF), the Federation of Korean Industries (FKI), the Korea International Trade Association (KITA), the Korea Federation of SMEs and the Federation of Middle Market Enterprises of Korea ― submitted the request, Monday, aiming to ease companies' financial difficulties and create investment opportunities and employment.
The amendment to the Corporate Tax Act, which includes the reduction of the top corporate tax rate from 25 percent to 22 percent, is currently pending in the National Assembly.
“Consumption is shrinking rapidly due to interest rate hikes and rising prices, and corporate profitability is also deteriorating due to high exchange rates and rising raw material prices,” the lobby groups said. “It is essential to improve the corporate tax system to reduce the burden by improving cash flow to respond to the threat of a prolonged economic recession.”
The six groups claim that corporate tax cuts will lead to increased investment and employment. According to a 2016 report by the Korea Development Institute (KDI), if the average effective corporate tax rate is reduced by 1 percent, the investment rate increases by 0.2 percentage points.
These six organizations also pointed out that OECD countries have lowered corporate taxes gradually over the past five years from 22.1 percent in 2018 to 21.2 percent in 2021, but Korea raised its corporate taxes from 22 percent to 25 percent.
“This is the reason that foreign investment in manufacturing has decreased by about 50 percent in the past three years,” the lobby groups said. “When the corporate tax is lowered, benefits are returned to not only the companies but also society as a whole.”