Corporate Income Tax Still High
By Lee Hyo-sik
Staff Reporter
The nation's top economic policymaker said Wednesday that corporate income tax rates are still high even after a planned 5-percentage point rate cut, indicating the government will further lower business-related taxes in the future to encourage companies to expand investments and hire more workers.
Strategy and Finance Minister Kang Man-soo told lawmakers at the National Assembly that businesses here bear heavier tax burdens than their counterparts in other countries, adding high tax rates do not help boost the economy.
``High tax policies do not help the economy. They do not promote hard work, competition and innovation,'' Kang said.
On Monday, the ministry unveiled a 26 trillion won ($23.6 billion) tax cut package for the next five years in a bid to revitalize the slowing economy. Among others, the maximum corporate tax rate will be cut from 25 percent to 20 percent by 2011. The minimum rate will also be lowered to 10 percent from the current 13 percent over the same period.
Currently, companies earning over 100 million won in taxable income are subject to up to 25 percent corporate income tax, while those earning less than 100 million are required to pay up to 13 percent. But the threshold will be raised to 200 million won in order to ease tax burdens on small and medium-sized enterprises.
When asked about the effects of the proposed tax cut plan on fiscal soundness, Kang said tax revenues usually increased after rate cuts in the past, as seen in many other countries, brushing aside criticism that the planed tax cut will undermine the state coffers.
Opposition parties and civic organizations are claiming that high-income earners and large businesses will likely become the main beneficiaries of the tax cut, further widening the wealth gap between the haves and have-nots.
On top of the planned corporate income tax cut, Kang said the government is considering allocating more budget next year to finance a larger number of infrastructure development projects to help businesses expand operations.
``It is also necessary to slash the number of civil servants and government spending to ease regulations and create a more business friendly environment here. Despite the government's effort to remove state controls, the nation's regulatory environment has strengthened over the years because of increasing government workers and state budget,'' the minister stressed, pitching for a small government.
Touching on the future course of the administration's real estate policies, Kang said the government will focus on stabilizing the property market by increasing homes in places where people want to live and levying taxes on capital gains from housing transactions.