[2022 National Audit] Choo Kyung-ho: "I Do Not Agree with 'Big Companies = Rich'... Corporate Tax Cuts Benefit SMEs"

The second day of the Ministry of Economy and Finance audit... Dispute over 'Corporate Tax Reduction'

Deputy Prime Minister for Economy Choo Kyung-ho is attending the audit of the Ministry of Economy and Finance held at the National Assembly on the 5th, responding to questions from lawmakers. Photo by Yoon Dong-joo doso7@

[Asia Economy Sejong=Reporter Kwon Haeyoung] On the second day of the first National Assembly audit of the Ministry of Economy and Finance under the Yoon Seok-yeol administration on the 5th, fierce debates continued over the government's push for a 'corporate tax cut.' Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho emphasized the necessity of corporate tax cuts to revitalize the economy, stating, "I do not agree with the frame that views large corporations as the wealthy."

At the Ministry of Economy and Finance audit by the National Assembly's Planning and Finance Committee that day, Deputy Prime Minister Choo said, "Corporate tax cuts are effective for investment, job expansion, and economic growth." He explained, "When South Korea raised the corporate tax rate to 25% (top rate), its international tax competitiveness dropped by 10 ranks," adding, "OECD countries have continuously lowered corporate taxes because it helps expand investment and revitalize the economy."

Regarding criticisms that the corporate tax cuts during the past MB government (Lee Myung-bak administration) increased corporate retained earnings rather than investment, he rebutted, "Corporate investment increased, and I am confident of its effects." He added, "Corporate investment rose from 33 trillion won in 2009 to 40 trillion won in 2013," and explained, "Retained earnings are actually lower compared to foreign companies."

He also actively refuted the claim that corporate tax cuts are "tax cuts for the wealthy." Deputy Prime Minister Choo emphasized, "Under the tax reform plan, large corporations receive about a 10% tax reduction benefit, but medium-sized and small enterprises receive a 12% tax reduction effect." He continued, "Corporate profits are distributed broadly to shareholders, consumer product price reductions, and wage increases for workers," and questioned, "If the economy is struggling and we do not take proactive measures in these areas but leave things as they are, how can we revive the economy?"

Regarding the income tax reform plan, he explained, "The tax base was adjusted to reduce the burden on lower-income brackets," adding, "The tax burden for a 30 million won income earner decreases by 27%, while for high-income earners it is only 1-5%, so the income tax reduction is greater for the middle and lower classes."

During the audit, debates also continued regarding the UK's withdrawal of its tax cut policy. The opposition party criticized the government's corporate tax cuts by citing the UK case. Deputy Prime Minister Choo drew a clear line, stating, "The core issue with the UK is not tax cuts but fiscal soundness," and emphasized that it is different from the corporate and income tax cuts our government is pursuing.

Deputy Prime Minister Choo explained, "The UK's national debt ratio now exceeds 100%, and there were warnings from the International Monetary Fund (IMF) and the international community that increasing fiscal spending would severely deteriorate fiscal soundness," adding, "The UK withdrew the plan to lower the top income tax rate from 45% to 40%, but maintained the cancellation of the corporate tax increase." He added, "If the UK had referred to the tax cut plan Korea announced in August, this situation would not have occurred."

He also hinted at the need to improve the comprehensive real estate tax heavy taxation on multi-homeowners. He argued, "Punitive taxation just because someone owns many houses is unreasonable," and insisted, "The comprehensive real estate tax system should be reorganized based on value standards."

Regarding the recent sharp rise in the won-dollar exchange rate, he reiterated that necessary measures would be taken to prevent 'concentration' phenomena. Deputy Prime Minister Choo said, "If the exchange rate rapidly concentrates, it limits the predictability of economic activities and increases volatility, so necessary market stabilization measures will be taken." He explained, "Foreign exchange reserves exist to be used when there is a shortage of foreign currency funds domestically and normal market transactions do not function," adding, "Appropriate market stabilization measures will be taken when necessary."

On the outlook for the won-dollar exchange rate, he said, "No foreign exchange authority in the world ever asserts the level of the exchange rate or how long and how much it will rise," adding, "Because it significantly affects the foreign exchange market, it is a cautious matter."