The government is preparing groundbreaking tax and financial incentives to create a 'business-friendly environment.' The tax credit rate for companies' increased investments next year will be raised from 3-4% to 10%, and through financial support totaling 50 trillion won, the government plans to promote expanded investment and enhance corporate competitiveness. Additionally, it will significantly ease economic sector regulations to reduce the burden on startups and small and medium-sized enterprises (SMEs), and relax economic penalties to guarantee free business activities.
On the 21st, the government announced the '2023 Economic Policy Direction' containing these measures. To boost economic vitality centered on the private sector, the government set investment promotion and regulatory innovation as key tasks. First, in the tax sector, the credit rate for increased investments next year will be raised to 10%. Considering the current credit rate is around 3-4%, this is more than double.
Furthermore, the government is reviewing designating displays as a national strategic technology and adding core energy-saving technologies such as high-efficiency boilers to new growth and foundational technologies. Jeong Jeong-hoon, Director General of Tax Policy at the Ministry of Economy and Finance, said, "Currently, only three national strategic technologies are designated: semiconductors, batteries, and vaccines, but we plan to add displays," adding, "We plan to decide the scope of designation in consultation with related ministries."
In the financial sector, the government will support facility investment funds at a record high level of 50 trillion won. The Korea Development Bank and Industrial Bank of Korea will provide 15 trillion won through a customized special support program for facility investment, while the Korea Credit Guarantee Fund and Korea Technology Finance Corporation will each support 5 trillion won through special guarantee programs for SME facility investments.
Accelerating Corporate Regulatory Innovation... Guaranteeing Management Freedom
The government will also accelerate regulatory innovation next year to restore corporate investment and job vitality. Through the 'Economic Regulatory Innovation Task Force (TF),' it will prepare core regulatory innovation plans for seven major economic themes with high private demand and investment effects. For example, in the bio-health sector, activation of healthcare data, and in the media and content sector, deregulation of games and online video services (OTT) are expected to be included.
Startup companies will have temporary exemptions from newly established or strengthened regulations to reduce their burden, and for important and core regulations whose sunset clauses have arrived, a 'post-regulation impact assessment' will be introduced to conduct in-depth analysis of costs and benefits. The Ministry of Economy and Finance explained, "We will actively resolve thematic regulations and shadow regulations related to new industries and startups, and transfer adjustable central government authorities to local governments."
Penal provisions that hinder corporate freedom and creativity, as well as life-related economic penalties for self-employed and small business owners, will be intensively improved. The disclosure system for large business groups, which imposes a heavy burden on companies, will raise the disclosure threshold and relax the frequency to about once a year. The 'merger and acquisition (M&A) review system' will be improved to allow companies to find self-correction measures when concerns about monopolies arise during M&A processes, and outdated corporate burdens and patent fee burdens will also be reduced.
Strengthening Financial Support for SMEs and Venture Companies
The government will promote the establishment of a 'SME Big Data Platform' so that small and venture companies, which are key to private economic vitality, can enhance their mid- to long-term competitiveness. It will establish a basis for data collection to enable monitoring of company status and provide customized services through artificial intelligence (AI) analysis of company-specific data. To help expand the growth potential of SMEs, a 50 trillion won financial support plan for SMEs will be prepared, and a regional SME development strategy will be created in the first quarter of next year.
For venture companies, a 'venture mother fund' will be established to ensure sufficient inflow of private capital. Benefits such as priority loss coverage and capital gains tax exemption for the mother fund will be provided to create a 1 trillion won dedicated private equity secondary venture fund by 2027, and more than 2,400 personnel will be expanded next year through joint on-the-job training (OJT) and recruitment programs by venture associations.
In particular, the investment ratio of listed companies by M&A venture funds will be significantly increased from the current 20% to 50%, increasing acquisitions and mergers through listed companies, and the criteria will be relaxed to allow stakeholders to invest when establishing special purpose companies (SPCs) for M&A venture funds. The government emphasized, "We plan to build a comprehensive information platform linked with M&A-related information on the technology transaction platform to support M&A involving technology transfers."
Mission- and Private Sector-Centered 'R&D' Support
The government will also shift technology research and development (R&D) to be mission- and private sector-centered. To encourage participation by mid-sized and large companies, it is reviewing raising the criteria for R&D funding support and will operate 'mission-oriented project groups' (solving national challenges) that have discretion over the entire project to focus on R&D. The government plans to support private companies to achieve results in new growth and foundational technology R&D while only playing a supporting role.
Yoon In-dae, Director of the Economic Policy Bureau at the Ministry of Economy and Finance, explained, "To induce private-led R&D, we will promote high-risk, high-performance projects where the private sector discovers performing companies in fields with high growth and innovation potential, and the government provides matching support."
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