Gov't, ruling party decides to raise corporate tax rate back to 25%
Government officials and ruling party lawmakers hold a closed-door policy meeting on tax reform at the National Assembly, Seoul, Tueday. Yonhap
The government and the ruling Democratic Party of Korea (DPK) agreed Tuesday to increase the corporate tax rate back to 25 percent, reversing a cut in such taxes made under the previous Yoon Suk Yeol administration in 2022.
During their policy consultations on tax reform, the two sides also decided to lower the capital gains tax threshold for major shareholders from 5 billion won ($3.6 million) to 1 billion won, rolling back Yoon's policy that was aimed at boosting investor sentiment.
Under the plan, the top corporate tax rate will be raised from 24 percent to 25 percent, restoring it to the level before the Yoon administration's tax cut.
The conservative Yoon administration had reduced the rate to 24 percent during its first year in office in an effort to help local firms boost investment.
The corporate tax rate was previously lowered from 25 percent to 22 percent in 2009 under the Lee Myung-bak administration, then raised again to 25 percent in 2017 under the liberal Moon Jae-in government, before being lowered to 24 percent under Yoon.
The move is part of President Lee Jae Myung's broader reform plan to reverse what the DPK has criticized as tax cuts for the wealthy that largely benefit conglomerates. It is also aimed at increasing tax revenues as the government is seeking to prop up the sagging economy with bigger fiscal spending.
"This increase in the corporate tax rate will normalize the tax system to its 2022 level," said DPK Rep. Jung Tae-ho, a member of the National Assembly's strategy and finance committee. "The capital gains tax threshold will also be restored to its pre-Yoon administration level."
The main opposition People Power Party has largely opposed the tax hike, arguing it would dampen corporate investment and burden companies already grappling with mounting pressure from U.S. tariffs.
Jung added that DPK lawmakers still remain divided over whether to apply separate taxation on dividend income, a proposal that the government claims will revitalize the stock market but critics argue will only benefit large shareholders.
Under the current tax code, financial income, including dividend income, is subject to a 15.4 percent tax rate for amounts up to 20 million won per year. If the amount exceeds the threshold, the income becomes subject to comprehensive financial income taxation, with an accumulated tax rate of up to 49.5 percent.