Taxes collected from conglomerates to drop

By Yoon Ja-young

The 2014 corporate tax by conglomerates will drop at least 15 percent, an analysis by Chaebul.com showed, Monday.

According to analysis of financial statements of the top 30 conglomerates by the business information provider Chaebol.com, corporate taxes for 2014 will total 15.23 trillion won, a 15.4 percent dip from 2013.

Samsung Electronics’ portion is about 4.5 trillion won, 43.2 percent less than the previous year, while Hyundai Motors will shoulder 2.3 trillion won, down 14.8 percent.

Total sales of the top 30 companies fell 1 percent last year to 1092.6 trillion won, operating profit plunged 18.5 percent to 65.6 trillion won, and net profit slumped 18.6 percent to 49.5 trillion won.

S-Oil, KT, SK Networks, Doosan and Doosan Heavy Industries all recorded losses and received an exemption from corporate taxes.

“The government’s corporate tax income falls when the economy is in bad shape,” said Cho Gyeong-lyeob of the Korea Economic Research Institute. “Many businesses had minus growth last year due to the sluggish economy.”

He said the outlook was negative for this year, too.

“The World Bank lowered its global economic growth forecast to 3 percent, and it seems it will be difficult for Korea to attain 3.5 percent growth,” he said. “Corporate operating profit is likely to fall this year as well.”

The government is under pressure to raise the corporate tax rate. The Lee Myung-bak administration lowered the corporate tax rate to 22 percent from 25 percent in 2009.

There has been criticism of the government that the public is paying through the nose to shore up budgetary shortages through the year-end tax settlement system as well as cigarette price hikes.

But Cho said a corporate tax hike would decrease total tax income for the government in the end.

“The tax rate hike is equal to a production cost increase,” he said. “Businesses are likely to raise prices. It will decrease consumption as well as production, and household income will also be affected.

“The corporate tax hike may increase the government’s tax income in the short-term, but it will negatively affect other taxes in the long run. That’s why governments around the world are competing to lower corporate taxes.”

According to the institute’s report, the government gathered 9 trillion won more corporate tax in 2010 from the previous year despite the cut in the corporate tax rate.

It expects the total corporate tax payment by listed companies will decrease by 1.2 trillion won if the government raises the tax rate back to 25 percent.