South Korea, Possibility of Further Corporate Tax Rate Cuts Next Year?

Discussion on Corporate Tax Rate Reduction... Choi Sang-mok "Considering Global Standards"
66% of Economic Experts "Corporate Tax Rate Should Be Lowered"

Could South Korea's current highest corporate tax rate of 24% be lowered further?

Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho expressed regret that last year's corporate tax rate cut was limited to just 1 percentage point and has announced plans to push for tax law reforms again in the 22nd National Assembly next year. Adding weight to the possibility of an additional cut next year, Deputy Prime Minister and Minister of Economy and Finance nominee Choi Sang-mok also stated that the corporate tax rate should be lowered to enhance the international competitiveness of companies.

Regarding the recent necessity to reduce the corporate tax rate, nominee Choi stated, "Corporate tax is a tax item that competes internationally, so global standards must be considered." He believes that a tax system competitive on an international level is essential for a dynamic, private sector-driven economy. He also expressed his intention to review the tax system in line with changing economic conditions to prevent tax evasion while actively supporting legitimate corporate activities.

Choi Sang-mok, the nominee for Deputy Prime Minister and Minister of Economy and Finance, is responding to questions from lawmakers at the confirmation hearing held at the National Assembly on the 19th.
[Photo by Yonhap News]

Last year, the government prepared a tax law amendment that lowered the highest corporate tax rate from 25% to 22% and reduced the number of taxable income brackets from four to three. However, opposition from the Democratic Party, which holds a majority in the National Assembly, blocked the proposal, and during the legislative process, the rate was only reduced by 1 percentage point per taxable income bracket.

The Yoon Suk-yeol administration strongly intends to lower corporate taxes further. Deputy Prime Minister Choo, who has announced plans to push for corporate tax system reforms in the 22nd National Assembly, believes that now is the time to seriously discuss simplifying the overall taxable income brackets and lowering the highest tax rate. The rationale is that reducing the corporate tax burden will help expand companies' global competitiveness and promote employment.

In fact, the business community is also raising expectations for an additional corporate tax rate cut. According to a survey conducted by the Korea Employers Federation from May 20 to June 2 through Global Research targeting 211 university professors in economics and business administration nationwide on "Recent Economic Conditions and Major Issues," 66.1% of respondents answered that the highest corporate tax rate should be lowered from the current level to strengthen global competitiveness.

Meanwhile, 29.7% of respondents said, "It should be lowered in the medium to long term but maintained at the current level for the time being." Those who responded "Maintain current level" accounted for 15.8%, and 18.2% said the rate should be increased.

If the corporate tax rate system is reformed, there is a high possibility that corporate investment and employment will increase. The Korea Economic Association analyzed that a 1 percentage point reduction in the highest corporate tax rate would increase the investment ratio relative to total corporate assets by 5.7 percentage points and employment by 3.5 percentage points, respectively.