Semiconductor Industry Association "Tax Credit Rate Increase, Prompt Legislation Needed"

Demand for Swift Processing of the Special Tax Treatment Control Act Amendment Bill

[Asia Economy Reporter Kim Pyeonghwa] As signs of parliamentary discussions emerge regarding the increase in the semiconductor facility investment tax credit rate, the Korea Semiconductor Industry Association has demanded swift legislation.

On the 9th, the Korea Semiconductor Industry Association stated, "We expect the prompt legislative promotion of the 'Measures to Strengthen Tax Support for Semiconductors,' reported at the Cabinet meeting presided over by the President on January 3rd, and bipartisan agreement in the National Assembly."

They added, "The expansion of the tax credit rate will enhance the investment capacity of private companies, which has been constrained due to worsening economic conditions, thereby driving the growth of the semiconductor industry," and "It will contribute to the national economy through production inducement and job creation effects in upstream and downstream industries."

Summary Table of Semiconductor Tax and Subsidy Benefits by Country /
[Image provided by Korea Semiconductor Industry Association]

Earlier, the Ministry of Economy and Finance submitted a revision bill to the National Assembly on the Restriction of Special Taxation Act, which includes a proposal to raise the tax credit rate to 15% for large and medium-sized enterprises and 25% for small and medium-sized enterprises. This is a follow-up measure after criticism arose when a bill to raise the tax credit rate for large corporations from 6% to 8% passed the National Assembly in December last year. There are expectations that a new revision bill to the Restriction of Special Taxation Act may be discussed in the National Assembly this month.

The association pointed out that semiconductors are a core industry responsible for 20% of the country's total exports and serve as key components for future new industries such as artificial intelligence (AI), autonomous vehicles, and robots. They also emphasized that, based on Statistics Korea's survey, the semiconductor industry led 70% of the increase in domestic manufacturing production and 80% of the increase in added value from 2016 to 2020.

The association explained, "When investing in one semiconductor manufacturing plant (approximately 40 trillion won), the production inducement effect and employment inducement effect over five years are estimated to be 200 trillion won and 270,000 people, respectively," and added, "National strategic industries with high contributions to the national economy, including semiconductors, require flexible support strategies linked to market conditions."

They also stated, "About 20% of large corporations' facility investments directly translate into sales for domestic small and medium-sized equipment companies," and "Domestic expenditure on materials and parts companies related to production facility operations amounts to about 10 trillion won annually." Given recent cases of domestic materials and parts companies developing technology and localizing products based on cooperation with large corporations, they explained that tax support is essential.