KCCI calls for corporate tax cuts

By Kim Yoo-chul

Korea's leading business lobby strongly called on the government to proceed with proposed corporate tax cuts as planned.

Korea Chamber of Commerce & Industry (KCCI) Executive Vice Chairman Lee Dong-keun made the point Tuesday in a luncheon meeting with reporters.

``It doesn’t make any sense either to delay or drop the corporate tax cut plan because many countries are seeing expanded facilities investments and hiring via tax cut-related policies,’’ Lee said.

He added that the complete withdrawal of the plan will heavily weigh on the information and technology (IT) and electronics sectors as higher corporate taxes are limiting the possibilities for further investment in facilities by leading players.

``Investment is the key for IT and electronics industries, brining an imminent effect to related fields. The cancellation of the plan will end up helping Taiwanese and Japanese rivals to narrow the market gap in key segments,’’ the vice chairman said.

Korea is home to the world’s top-tier technology company Samsung Electronics and first-string carmaker Hyundai-Kia Automotive Group. Such export-driven players are involved in fierce competition with their Asian peers on global markets.

Currently, the nation’s corporate tax rate is a maximum of 22 percent, but the figure could reach 24.2 percent when local income tax is added.

In 2008, there was a proposal to cut the business tax rate to 20 percent, which would have gone into effect this year. But the scheme was postponed to 2012 along with another amendment in the Corporate Tax Law.

``We can say that’s populism. If the government lowers corporate tax to 20 percent, then the nation’s major industrial titans will have more room to invest 10 percent more,’’ Lee said.

Domestic companies paid a total of 40 trillion won in corporate tax last year. Lee’s claim means that 4 trillion won more capital will be invested upon the tax cut.

The insistence comes at a time when major Asian countries are on track to cut the taxes. The rate is 16 percent in Taiwan and Singapore. In Hong Kong, the corporate tax rate is 16.5 percent, data given by the KCCI showed.

``The government didn’t even touch on the possible reduction of a transfer tax rate. We need policy consistency to help industries get sustainable energy,’’ said Lee.