By Na Jeong-ju
Staff Reporter
The country's top economic policymaker said Monday the government will continuously lower corporate taxes to help companies improve their growth potential.
``We will phase down corporate taxes and give incentives to companies expanding research and development activities,'' Policy Coordination & Finance Minister Kang Man-soo said in a speech on the occasion of the 42th anniversary of Taxpayers' Day.
In a bold initiative to ease the tax burden on corporations, the government is considering introducing a ``consolidated taxation system,'' in which companies owned by one firm are regarded as a single entity for tax payment, by the end of this year, Kang said.
Under the system, a conglomerate will take responsibility for all tax obligations of its subsidiaries. Currently, the subsidiaries pay taxes separately.
``We will push for drastic reform of corporate tax to help firms improve their competitiveness. It is one of the top policy goals,'' he said.
The aim of a tax consolidation regime is to reduce administrative costs for tax authorities and reduce costs for corporate taxpayers. Countries that have adopted the system include the United States, the United Kingdom, Australia and New Zealand.
Through a range of tax cuts, the Lee Myung-bak administration is seeking to encourage businesses to expand investment and create jobs, while prompting consumers to spend more to boost domestic consumption.
Lee's policymakers have said the government will cut maximum corporate taxes from 25 percent to 20 percent over the next five years. Currently, companies earning over 100 million won in taxable income are subject to up to 25 percent of corporate income tax.
It also plans to allow companies to deduct up to 10 percent of their investment in research and development activities from taxable income, up from the current 7 percent.
In an inaugural speech on Feb. 25, President Lee called corporations the ``source of national wealth and the prime creator of jobs,'' saying he will continue to lower the tax burden on companies.