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| Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho speaks during a parliamentary audit of his ministry at the National Assembly on Yeouido, Seoul, Wednesday. Yonhap |
By Yi Whan-woo
Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho defended the government's plan to reduce the maximum corporate tax rate to 22 percent from 25 percent during a parliamentary audit, Tuesday, arguing it is designed to benefit small and medium-sized enterprises (SMEs) more than larger businesses.
Choo's remark came as the corporate tax cut plan has been disputed for favoring chaebols.
It accordingly is anticipated to face a bumpy road in winning approval from the National Assembly, which is dominated by the main opposition Democratic Party of Korea (DPK).
The right-leaning Yoon Suk-yeol administration seeks to win approval for its maximum corporate tax rate plan by December after introducing it in mid-2022.
"The scope of tax deduction will be larger for SMEs, not conglomerates, under the government's plan to cut the income tax rate for businesses," the finance minister said.
He referred to the revised tax brackets, 22 percent for firms with taxable earnings of more than 20 billion won ($14 million) and 20 percent for firms with 20 billion won or less taxable earnings.
He called the tax cut for businesses "an essential policy tool" and asked for parliamentary support to implement the plan.
"The government needs help (from the National Assembly) to cope with the economy which possibly can get worse next year," Choo said.
The planned corporate tax overhaul will result in a decrease in tax revenue for the government, considering that conglomerates accounted for a major part of such revenue.
Nevertheless, Choo said the corporate tax cut plan will allow conglomerates to have more money for investments rather than for taxes, and such investment will result in a cycle of improved business productivity and an increase in the government's tax revenue.
When asked to compare Korea with the United Kingdom's drastic tax cut plan for the wealthy, Choo assessed it was a question of financial soundness, not the tax cut itself, that became problematic in the U.K.
The new British government announced a plan last month to slash tax for the highest income earners to 40 percent from 45 percent but scrapped the plan amid growing concerns over the possibility of a further economic crisis.
"The cases of the two countries are completely different and the tax overhaul plan should not be a worry in Korea," he said.
Other tax-policy issues brought up at the audit, Wednesday, included reshoring of Korean businesses operating abroad and postponement in taxation on gains from all financial investment for the next two years.
Choo said that the number of companies returning home is smaller than expected as Korea lags behind in terms of tax benefits and other incentives.
"Reshoring is helpful for job creation and economic growth, and thus, the government will find ways to bolster relevant support," he said.
He said a postponement of financial investment gains is necessary considering the volatility in financial markets.
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