Semiconductor Act Discussion Begins in National Assembly Today... February Passage Faces Difficulties (Comprehensive)

Corporate Tax Support Plan Expanded from 8% to 15%
Opposition: "Reversal Just One Month After Bipartisan Agreement"
Jang Hye-young: "Still Unaware of Afternoon Tax Subcommittee Agenda"

[Asia Economy Reporter Lee Hyun-joo] On the 14th, the National Assembly's Planning and Finance Committee held a plenary session and tabled the government's additional tax support plan for semiconductor facility investments by large corporations (Restriction of Special Taxation Act). The Planning and Finance Committee plans to hold consecutive tax subcommittee meetings in the afternoon to discuss the amendment to the Special Taxation Act in earnest, but no agreement on the agenda has yet been reached between the ruling and opposition parties.

The government submitted last month an amendment to the Special Taxation Act (Semiconductor Act) to increase the tax credit rate for large corporations' semiconductor facility investments, which was raised at the end of last year through the National Assembly plenary session, from the current 8% by an additional 7 percentage points to 15%, to secure global market competitiveness in domestic semiconductors. The amendment includes facility investments in national advanced strategic technologies such as batteries and vaccines, and for small and medium enterprises, the rate will be raised from 16% to 25%. The resulting estimated tax revenue loss is 3.65 trillion won.

The ruling party sees no significant disagreement in the practical review related to the Semiconductor Act and expects it to proceed smoothly in the February National Assembly session. However, the opposition party criticizes it as a 'privilege for large corporations' and opposes it, saying it overturns an amendment agreed upon by both parties just one month after the law's enforcement. A Planning and Finance Committee official from the Democratic Party said, "The schedule has been set, but there are differences in positions regarding the bill's submission," adding, "We need to conduct a final review."

[Image source=Yonhap News]

The government and ruling party are expected to argue that while the economic crisis is severe, the national advanced strategic technologies were designated during the Moon Jae-in administration, and this is not a conglomerate privilege but a necessary condition to drive the growth of Korean industry. Concerned about this year's economic downturn, the government has also submitted an amendment to temporarily raise the temporary investment tax credit rate (3~4%) uniformly to 10% for increased investments regardless of industry or purpose, in addition to the upper limit on the tax credit rate.

Even if the Special Taxation Act is placed on the tax subcommittee agenda, it may be blocked by the majority opposition party, making the final passage uncertain. The ruling and opposition party secretaries of the Planning and Finance Committee have not yet officially agreed to table the Semiconductor Act. The amendment to the Special Taxation Act, passed by bipartisan agreement at the end of last year, is being overturned due to issues raised by the Presidential Office, causing significant dissatisfaction within the Democratic Party. A Planning and Finance Committee official from the People Power Party said, "We need to persuade the Democratic Party well, but since they hold the majority of seats, it is not an easy situation."

Jang Hye-young, a tax subcommittee member of the Planning and Finance Committee from the Justice Party, criticized at the plenary session, "Although the tax subcommittee review is scheduled for this afternoon, I heard that it has not even been decided which bill will be precisely reviewed," adding, "Since last year, the Planning and Finance Committee has shown the public scenes of disputes over the appointment of subcommittee chairs and rushed reviews of 300 bills. Today, such scenes are repeating again."

[Image source=Yonhap News]