10% of corporate taxes come from 2 firms
By Yoon Ja-young
Samsung Electronics and Hyundai Motor shoulder 10 percent of the country’s total corporate taxes. As nearly a quarter of total corporate taxes come from the country’s top 10 conglomerates, analysts are showing concern that the government may face problems in collecting taxes if these companies falter.
According to the National Assembly Budget Office, Thursday, the government collected 10.6 trillion won in tax from the country’s top 10 corporate tax payers in 2015. That is 23.5 percent of the total corporate tax collection in that year. The share of the top 10 corporate tax payers temporarily fell to 21.5 percent in 2014 from 22.4 percent the previous year, but rose again in 2015.
Samsung Electronics, which was levied 3.2 trillion won in taxes in 2015, is the country’s biggest corporate tax payer. It shouldered 7.1 percent of the total collected. Hyundai Motor followed with 3.1 percent, or 1.4 trillion won.
KEPCO, SK hynix, Korea Hydro and Nuclear Power were the next top taxpayers, followed by LG Chem, Hyundai Mobis, Kia Motors, E-mart and SK Telecom.
Market watchers say that Korea seems to depend too much on a handful of taxpayers.
“There are around 600,000 businesses filing corporate taxes in Korea, and around 4,000 companies shoulder 75 percent of the taxes. Especially, the top 10 conglomerates pay a considerable part of the taxes while many of the small and medium sized enterprises don’t pay any taxes at all,” said professor Hong Ki-yong at Incheon National University.
“It is not a problem when the economy is in good shape, but if some of the big taxpayers suffer a slump in business, the government might face problems.”
He took Samsung Electronics as an example. “According to its financial statement, its expenses in corporate taxes stood at above 7 trillion won in 2013. In 2014 and 2015, it fell to the 3 trillion won range as its business wasn’t good in those years,” he said.
“It is good to have global businesses like Samsung or Hyundai, but it is worrisome at the same time because tax income could be damaged if they fail to survive against global competition.”
The government collected 52.1 trillion won in corporate taxes last year, up 15.7 percent from the previous year, but analysts say the outlook for tax collection this year isn’t positive due to growing uncertainties coupled with the economic slowdown and corporate restructuring.
However, it is difficult to find a solution for such tax concentration.
“Some suggest cutting taxes for SMEs to nurture them, but that will have no effect at all since many of them already are not levied any taxes. It goes the same with earned income tax. Among 17 million wage earners, nearly half are exempt from having to pay taxes,” the professor said.
Fundamentally, the country’s economy seems to depend too much on a few conglomerates. According to CEO Score, a business evaluation agency, the country’s biggest conglomerate Samsung Group created 68.4 trillion won in value-added in 2014. That is 4.7 percent of the country’s gross domestic product (GDP). Second-placed Hyundai Motor Group added 2.6 percent of GDP.