US and Taiwan Cut Semiconductor Tax by 25% While Korea Gets Only '8%'...Industry Backlash

Comments on 'Semiconductor Special Act Tax Law'
"Ruling party's 20% is worse than opposition's 10%"
"US 25%·Taiwan 25%... National Assembly and government need to supplement"

[Image source=Pixabay]

[Asia Economy Reporter Moon Chaeseok] The business community strongly opposed the government's plan to slightly raise the investment tax credit rate, a key issue in the Semiconductor Special Act, from 6% to 8%. They pointed out that compared to 25% in the U.S. and 25% in Taiwan, this remains at about one-third, which will not significantly help enhance competitiveness. This result is smaller than the ruling party's proposal of 20% and even the opposition party's 10%.

On the 24th, Yoo Hwan-ik, head of the Industrial Division at the Federation of Korean Industries, expressed disappointment in a statement titled "Comment on the Passage of the Special Tax Treatment Control Act Related to the Semiconductor Special Act in the National Assembly." Yoo said, "It is regrettable that the amendment to the Special Tax Treatment Control Act, which allows a tax credit of 8% on large corporations' investments in facilities for national advanced strategic industries such as semiconductors, passed the National Assembly."

Yoo added, "Raising the tax credit rate for advanced industry facility investments should be approached from a long-term perspective, considering that Korea can secure leadership in future industries and that industries and companies can grow to continuously increase tax revenue. I am concerned that the National Assembly and government may be overly focused on the short-term tax revenue reduction effect," he criticized.

[Image source=Yonhap News]

According to him, the U.S. provides a 25% tax credit benefit to domestic semiconductor equipment investment companies. The Taiwanese government recently proposed an "Industrial Innovation Act Amendment" to raise the tax credit rate for research and development (R&D) and equipment investment of semiconductor companies headquartered in Taiwan from 15% to 25%. Japan decided to support half of the construction cost, 476 billion yen (about 4.6 trillion KRW), to attract the world's largest Taiwanese foundry (semiconductor contract manufacturing) company TSMC's factory to Kumamoto.

Yoo said, "Countries around the world are making every effort to strengthen competitiveness in advanced industries such as semiconductors and to attract related companies," adding, "I hope the National Assembly and government will continue discussions to expand the tax credit rate so that Korean companies can maintain competitiveness in the global advanced industry war and supplement countermeasures."