'Moon should not to create public jobs with taxes'
Hyung Tae-gun, left, senior adviser of the law firm Yulchon, speaks during a Korea Times roundtable meeting in downtown Seoul, Wednesday, in time with the inauguration of President Moon Jae-in. From left are Hyung, Yonsei University professor Sung Tae-yoon, Korean Academic Society of Business Administration Chairman Han In-goo and Chairman Yoo Jang-hee of the National Academy of Sciences’ humanities and social science division. / Korea Times photo by Shim Hyun-chul
Experts differ on corporate tax hike
By Nam Hyun-woo
Yoo Jang-hee, chairman of the National Academy of Sciences’ humanities and social science division
Han In-goo, chairman of the Korean Academic Society of Business Administration
Sung Tae-yoon, Yonsei University professor
Hyung Tae-gun, senior adviser of law firm Yulchon
People pin high hopes on newly elected President Moon Jae-in. But experts say his administration faces tall tasks which would decide the fate of Asia’s fourth-largest economy amid the fast-changing global environment.
Participants of a group discussion organized by The Korea Times picked tax hikes and government spending on job creation as two key topics for the new administration’s economic policies. They showed different opinions on the former but univocally warned of negative implications of the latter.
Yoo Jang-hee, chairman of the National Academy of Sciences’ humanities and social science division, said the country needs to raise corporate taxes. One of Moon’s economic pledges is to return the corporate tax rate to 25 percent from the current 22 percent.
“Korea’s corporate tax rate is lower than other advanced economies and our companies are well aware of the fact. Accordingly, they would not strongly oppose moderate tax hikes,” said Yoo, who also headed the Korea Commission for Corporate Partnership.
“The new administration is required to use the increased tax revenues for marginalized people.”
Han In-goo, chairman of the Korean Academic Society of Business Administration (KASBA), was against the idea, saying the new leader should consider fair competition separately from corporate competitiveness.
“Globally, there is a trend of lowering corporate taxes,” Han said. “Korea needs to be careful when it comes to issues concerning corporate taxes and regulations when advanced economies such as the United States and France are set to lower taxes and promote a business-friendly environment.”
Yonsei University professor Sung Tae-yoon also said the government should try to raise its tax incomes in other areas rather than jacking up the corporate tax rate.
“Korea has room to crank up its tax rates on capital gains in consideration of other advanced countries’ examples. In particular, corporate capital gains should be taxed in a proper manner,” Sung said.
“I’m not saying the government should not raise the corporate tax. What I’m saying is that Korea can raise its tax income by working on capital gains taxes. That should be the priority.”
The participants in the discussion questioned the second major key subject of job creation through government spending. Moon promised to create 810,000 jobs in the public sector to tackle Korea’s record-high youth employment rate of 9.8 percent last year.
Hyung Tae-gun, senior advisor of Yulchon law firm, said the Moon administration’s success hinges on how it deals with the country’s unemployment issue.
“When it comes to his pledges on job creation, I wonder whether Moon’s camp looked into the case very carefully and seriously,” said Hyung, formerly a standing commissioner at the Korea Communications Commission.
Hyung worried that such an approach would not be very efficient.
Sung echoed that the new leader should not spend taxpayers’ money on creating public jobs, which he said would not revive the moribund economy. He expects people would reduce their spending because they would expect that the government would raise taxes to fund the hiring expenditures.
Yoo also said creating public sector jobs through setting up a supplementary budget would be a stopgap. He stressed that the government needs to focus on improving flexibility in the labor market.
Hyung agreed that improving labor market flexibility will be a key to the success of the Moon administration because the new President’s pledge of nurturing industries related to the Fourth Industrial Revolution would depend on how flexible the country’s labor market is.
“Germany is already doing well in smart factories, because the country’s labor market is very flexible and Germans worry less about unemployment thanks to the social safety net,” he said. “Unless the government raises the country’s labor market flexibility, Korea would not be able to succeed in the Fourth Industrial Revolution era.”
Yoo said the new administration should promote the idea of “Korenter,” a portmanteau of Korea and “enter” that is a contrary concept to Brexit.
“Under the concept, the government should convince the world that Korea wants to cooperate with global partners and is open to joining global economic institutes as long as it is beneficial to both Korea and its trade partners.”