Top 10 SME News of the Year 'No.1'... 'Recognition of SME Status for SME Cooperative Associations'

Major News Including Securing Negotiation Rights for Payment Adjustments Between Large and Small-Medium Enterprises and Failure to Introduce Taxation on Excess Retained Earnings

[Asia Economy Reporter Kim Jong-hwa] The Korea Federation of Small and Medium Business (Kbiz) selected "Recognition of the status of small and medium-sized enterprises (SMEs) for SME cooperatives" and "Granting the right to negotiate delivery price adjustments to Kbiz" as the top 10 SME news stories of the year.

On the 20th, Kbiz announced that it had selected 10 major issues with significant symbolism and impact among legislative, institutional, and support measures that positively influenced the development of SMEs throughout the year.

Kim Ki-moon, president of Kbiz, said, "It was a difficult year for both SMEs and small business owners due to the unprecedented COVID-19 crisis," adding, "However, there were also meaningful policy achievements for the re-leap and overcoming the crisis of SMEs." He emphasized, "Next year, we will do our best to protect the rights and support SMEs and cooperatives."

Below are the "Top 10 SME News of the Year" selected by Kbiz.

① Recognition of SME status for SME cooperatives: SME cooperatives had been excluded from many SME support policies. However, with the revision of the Framework Act on Small and Medium Enterprises in September, a legal foundation was established allowing SMEs to participate in various government and local government SME support projects such as finance, research and development (R&D), and exports through the cooperative platform.

② Kbiz secures the right to negotiate delivery price adjustments with large corporations on behalf of SMEs: The Win-Win Cooperation Act was amended to allow Kbiz to negotiate delivery price adjustments with large corporations on behalf of SMEs and cooperatives. This established a fair trade foundation where SMEs can receive appropriate compensation for their hard work.

③ Failure to introduce excess retained earnings taxation by the government: The '2020 Tax Reform Plan' announced on July 22 included a controversial provision that corporations with major shareholders and related parties holding more than 80% of shares, i.e., quasi-individual corporations, would be taxed on excess retained earnings as if they were dividends distributed to shareholders. Due to Kbiz's extensive legislative opposition activities against the National Assembly and government, this taxation plan was scrapped. It is estimated that about 350,000 small corporations benefited from this.

④ Next year's minimum wage set at 8,720 won, the lowest increase rate since the IMF financial crisis: On July 14, the Minimum Wage Commission decided to raise the 2021 minimum wage by 1.5% (130 won) from this year to 8,720 won. The increase rate is lower than the 2.7% rise during the financial crisis and is the lowest since the introduction of the Minimum Wage Act in 1998. The SME sector initially demanded a reduction or at least a freeze of the minimum wage. The minimum wage had sharply increased by 32.8% over three years since 2017, and this year, the COVID-19 crisis pushed small business owners to the brink.

⑤ Raising the simplified VAT taxation threshold to 80 million won, easing the standard for the first time in 21 years: The simplified VAT taxation threshold was raised from an annual sales amount of 48 million won to 80 million won, reducing the tax burden on small SMEs and small business owners. The Ministry of Economy and Finance expects that this change will increase the number of simplified taxpayers by 230,000 and reduce the tax burden per person by 1.17 million won.

Additionally, ⑥ easing liquidity crises for SMEs due to COVID-19, ⑦ the first official statistics showing 6.63 million SMEs instead of 3.6 million, ⑧ raising the limit for cooperative-recommended negotiated contracts to 100 million won, ⑨ establishing the first project involving smart factories and SME cooperatives and creating jobs, and ⑩ Kbiz participating as the second-largest shareholder in the third internet bank 'Toss Bank' were also selected as top 10 news stories.