National Assembly Budget Committee to Review at Tax Subcommittee on 16th
Semiconductor Tax Credit Rate Expected to Expand Beyond Government Proposal
Lee Jae-myung's 'Gold Time' Mention Accelerates Opposition Party's Pace
The 'Semiconductor Special Act,' which expands tax credits for semiconductor facility investments, is expected to be passed during the March extraordinary session of the National Assembly.
According to the National Assembly's Planning and Finance Committee on the 8th, the ruling and opposition parties reached a consensus to hold a tax subcommittee meeting on the 16th to review the Semiconductor Special Act and agree on its passage. It is reported that the bill is likely to include provisions to raise the semiconductor tax credit rate higher than the government's original proposal.
Previously, the government's draft of the Restriction of Special Taxation Act submitted by the Ministry of Economy and Finance included raising the tax credit rate for investments in national advanced strategic industry facilities such as semiconductor-related facilities from 8% to 15% for large and medium-sized enterprises, and from 16% to 25% for small and medium-sized enterprises. Including an additional 10% tax credit for the amount exceeding the average investment over the past three years, the credit rate could increase up to 25-35%.
Ryu Seong-geol, the ruling party's Planning and Finance Committee spokesperson from the People Power Party, said in a phone interview with this outlet, "There have already been many discussions regarding the tax credit rate in the tax subcommittee and the full Planning and Finance Committee, and we plan to discuss and process it on the 16th," adding, "Since the government proposal has been submitted, the government and ruling party will use it as the baseline."
On the other hand, the Democratic Party is reportedly considering a plan to raise the tax credit rate even higher than the government proposal. An opposition party Planning and Finance Committee official said, "There is some consensus within the Democratic Party that the tax credit rate for semiconductors needs to be increased," and added, "If there is no issue with tax revenue, it is possible to raise it higher than the government proposal." However, the official emphasized, "First, sufficient discussions among party members are necessary," and added that further opinions from within the party and the industry need to be gathered.
Lee Jae-myung, leader of the Democratic Party of Korea, is speaking at the Supreme Council meeting held at the National Assembly in Yeouido, Seoul on the 8th. Photo by Hyunmin Kim kimhyun81@
Previously, the Democratic Party maintained a negative stance on raising the tax credit rate. However, with the recent implementation of the U.S. CHIPS Act, the party has shown a more progressive position on supporting the semiconductor industry. Amid worsening internal conflicts due to the judicial risks faced by Democratic Party leader Lee Jae-myung, the party leadership has emphasized legislation focused on public welfare. On the 5th, Lee also urged the government to prepare countermeasures through a Facebook post, stating, "Speed is life in crisis response. We must not miss the golden time again due to delayed or inadequate responses like with the IRA (Inflation Reduction Act)."
The Democratic Party is holding an emergency expert meeting at the National Assembly in the afternoon to discuss responses to the semiconductor support law. A Democratic Party official explained, "Due to the global semiconductor industry situation and pressure from the U.S., there is a need to adjust the tax credit rate," adding, "The Democratic Party has continuously shown interest in eco-friendly energy issues, so there seems to be talk about raising the rate."
It is also known that the Ministry of Economy and Finance's partial acknowledgment of the government's proposal's shortcomings influenced the bipartisan agreement. After President Yoon Seok-yeol ordered a review of the bill passed last year by the Ministry of Economy and Finance, the ministry submitted a revised bill to the National Assembly on January 3rd, raising the credit rate further. At the Planning and Finance Committee's full meeting on the 22nd of last month, Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho apologized, saying, "I apologize for not recognizing the necessity earlier and not requesting it," and added, "We have belatedly recognized the issue and submitted a tax law amendment, so please support us."
The Democratic Party is also pushing for the introduction of a 'Korean version of the Inflation Reduction Act (IRA Act),' which includes subsidies for energy transition and expanded tax credits for corporate investments. This is expected to be discussed alongside the government proposal at the Planning and Finance Committee's tax subcommittee.
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