Lee Yong-woo: "Corporate Tax Cuts Require Examining Effective Tax Rates... Investment Didn't Increase During MB Administration"

Corporate Tax Cut, Top Priority... Will It Overcome the 'Geodae Yadang'?

Lee Yong-woo, Emergency Response Committee member of the Democratic Party of Korea, is attending the Emergency Response Committee meeting held at the National Assembly on the 13th and delivering an opening remark. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Koo Chae-eun] Lee Yong-woo, a member of the Emergency Response Committee of the Democratic Party of Korea, criticized the Yoon Seok-yeol administration's economic policy as 'MB Season 2' or 'the return of Park Geun-hye's tax-cut-and-spending-cut policy.'

On the morning of the 17th, Lee appeared on MBC Radio's "Kim Jong-bae's Focus" and said, "The corporate tax cut is exactly what was done during the MB administration," adding, "Whenever I look at the Ministry of Economy and Finance's economic policy direction, it seems like they often just 'change the cover' without changing the person." Lee said, "The top tax rate for those earning over 300 billion won is 25.7%, but we need to specifically examine how much the tax burden on small and medium-sized enterprises will increase or decrease within that. We should look not only at the nominal tax rate but also at the effective tax rate to see whether the effective tax rate is actually applied, and also specifically consider the scale of tax exemptions given to large corporations. Approaching this issue with a simple yes or no stance right now is not appropriate."

He expressed a critical view of the tax relief stance when linked to additional fuel tax cuts and other price stabilization measures. Lee said, "It seems more like showing that we are working hard rather than having an effect, but inevitably, fuel taxes and prices will rise," adding, "Electricity and gas rates will inevitably increase. In such a situation, the vulnerable groups suffer the most, but the policies to be announced this time really do not show any strengthening of the safety net for vulnerable groups."

He continued, "As we approach these difficult times, it is necessary for the government to supplement through fiscal measures, but the effect of cutting taxes such as corporate tax is quite limited."

He added, "During the Lee Myung-bak administration in 2008, corporate tax was cut from 25% to 22%, and as a result, retained earnings increased by 158%, and net income by 115%, but investment decreased by 0.2% over seven years," criticizing, "When a crisis deepens, the private sector does not invest, so the government’s fiscal policy needs to bear some of the risk to trigger a turnaround. However, without this, simply cutting corporate tax does not logically lead to increased investment."