Lee Yeon-woo is a financial journalist at The Korea Times. Her wide range of reporting includes policies, macroeconomics, stock market, companies and even crypto. She is passionate about connecting the dots in Korean finance and making it easier for foreign nationals to understand. Based on her previous experience as a national reporter, she also has a keen interest in social issues within the sector, including gender equality and ESG. Your tips and insights are always appreciated. You can send them to yanu@koreatimes.co.kr.
Tax breaks for esports proposed after success of LOL World Championship
Fans watch the League of Legends World Championship final between Korea's T1 and China's Weibo Gaming at the Gocheok Sky Dome in Seoul, Nov. 19. Joint Press Corps
By Lee Yeon-woo
The National Assembly is currently discussing providing tax breaks to companies hosting esports events in Korea. This follows the recent League of Legends (LoL) World Championship in Seoul, which reportedly generated hundreds of billions of won in economic benefits.
According to sources in the National Assembly, the Strategy and Finance Committee during a meeting last Wednesday deliberated on proposed bills aimed at offering tax incentives to hosts of esports events.
Under the existing law, companies operating sports or esports teams are given corporate tax deductions of 10 percent of their operation costs for three years.
Members from both the ruling and opposition parties are said to have reached consensus on the necessity of further incentives, acknowledging the symbolic importance and economic advantages of esports tournaments.
Rep. Yoo Gyeong-joon of the ruling People Power Party proposed a bill that includes an expansion of the deduction rate from 10 percent to 20 percent for five years, and a separate deduction of 20 percent from corporate tax for the expenses involved in hosting esports tournaments, also for five years.
Rep. Jin Sun-mee from the main opposition Democratic Party of Korea also proposed a 10 percent tax deduction on the expenses of hosting esports tournaments.
Fans watch the League of Legends World Championship final between Korea's T1 and China's Weibo Gaming on screens at Gwanghwamun Square in central Seoul, Nov. 19. Yonhap
The industry expects that both direct and indirect economic effects of the LoL World Championship will reach 200 billion won ($153 million). The finals attracted 100 million viewers globally, with a total of 400 million cumulative viewers. Ticket sales at the finals venue, Gocheok Sky Dome, alone generated 4 billion won in revenue.
The tournament also demonstrated the potential of esports tourism. About 15 percent of those who reserved tickets for the live broadcast of the finals in CGV cinemas were foreign nationals. The enhanced visibility of Seoul in LoL World Cup-related articles and the promotional impact for sponsors was also noteworthy.
However, despite increasing public interest, direct profits from esports events still lag behind expectations. Last year, T1, the esports subsidiary of SK Square and the winner of this year's championship, reported revenue of 23.9 billion won and an operating loss of 16.6 billion won.
"Companies spend a significant amount of money to host esports events," said Kim Kyung-ho, the policy adviser of the committee, after reviewing the proposed bills. "The esports industry, interconnected with the digital platform sector, generates significant economic impacts. The increasing importance of this industry is further highlighted by its recognition as an official sport in the 2022 Asian Games."
He added, "This underscores the importance of regularly hosting tournaments and providing support for the growth and development of the esports sector."
Members of Korea's T1 hold The Summoner's Cup trophy after their victory against China's Weibo Gaming at the League of Legends world final in Seoul, Nov. 19. Yonhap
President Yoon Suk Yeol expressed his intention to "support the gaming industry in gaining global competitiveness and leading the market" in his congratulatory message to T1. The government is expected to take a proactive role in developing strategies to stimulate the industry's growth.