By Yi Whan-woo
The nation’s two largest opposition parties are stepping up their campaign to increase corporate tax, triggering concerns from enterprises and the government.
The main opposition Minjoo Party of Korea (MPK) said Monday it will introduce a bill that will include raising the maximum rate of corporate tax from 22 percent to 25 percent, Tuesday.
Companies with annual profits of over 50 billion won ($45 million), mainly conglomerates, have been paying up to 22 percent corporate tax.
The minor opposition People’s Party “is on the same page” with the MPK in revising the corporate tax rate, although it is seeking to come up with its own measure by September, according to its officials.
The two parties are targeting large firms to raise funds needed to expand welfare programs, create more jobs and help revive the faltering economy.
Citing the government’s recent tax changes, a People’s Party official said these are expected to increase tax revenue by only 317.1 billion annually while the country’s accumulated budget deficit hit 38 trillion won last year.
“Considering that, a better plan is inevitable, and we think a corporate tax hike will help resolve the problem to some extent,” the official said on condition of anonymity.
Meanwhile, the MPK will also demand a revision to the income bracket that requires individuals who earn 150 million won or above annually to pay 38 percent income tax.
The party said the rate should be increased to more than 40 percent for those who earn 500 million ($450,000) or above.
The MPK turned down criticism that it is “squeezing” the conglomerates and high-income earners.
It cited that Korea ranked 19th among 34 member states of the Organization for Economic Cooperation and Development in terms of the maximum corporate tax rate last year. Its 22 percent corporate tax ceiling was below the OECD average of 23.19 percent, including the United States with 33 percent and France with 34.4 percent.
“The largest corporations should be the first targets for taxation,” the MPK said.
The Ministry of Strategy and Finance, however, cited other OECD data in refuting the MPK’s claim
The ratio of Korea’s corporate tax to its total revenue amounted to 14 percent in 2015, the fourth highest among OECD members, following Norway with 21.7 percent, Australia with 18 percent and New Zealand, 14.1 percent.
“You can see that the amount of taxes paid by the conglomerates is relatively large,” a ministry official said on condition of anonymity. “Moreover, a handful of large corporations account for most of the corporate tax.”
According to data from the National Assembly Budget Office, 0.1 percent of some 650,000 companies subject to taxation pay about 64 percent of the total corporate tax.
Citing its 2014 data, the government also claimed that 200,000 people whose earnings were 120 million or above accounted for 1.5 percent of the country’s total work force. And they paid 40.9 percent of the total income tax.
It added that there were 8 million workers exempted from income tax and they accounted for 48.1 percent of the salary-paid workers.
“It will be more effective to impose tax on those who are exempt from taxation instead of putting more of a burden on high-income earners,” a ministry official said.