The 1.8 Million Won Scratched by Husband Was a 'Corporate Card'... Sales Enough to Cover Purchases at Emart [Corporate Card Golf]

①450,000 KRW per person payment... The reason for rising golf costs is 'Corporate Card'
With increased entertainment expense limits, golf course corporate card sales exceed 2 trillion KRW
Corporate card sales surpass Emart's market capitalization
Green fees rise with upscale entertainment golf trends

Editor's Note'Entertainment golf' using corporate credit cards has driven the golden age of the golf industry since COVID-19, but recently, as companies have restricted corporate card payments at golf courses, the golf industry is facing a crisis. The 'golf fever' surged so much that the term "gollini" (golf + child) emerged during the COVID-19 boom, but now the enthusiasm is rapidly cooling amid economic uncertainty. In fact, golf courses, which were the biggest beneficiaries of increased corporate card sales due to the raised entertainment expense limits in 2020, have seen a decline in visitors since last year, worsening their business conditions. The trend of large corporations restricting corporate card use at golf courses is also increasing.

Recently, we examined the receipt of Executive Director Kim from Company A, who entertained clients with golf. Despite it being a weekday, the green fee was 200,000 KRW per person. For a team of four, the green fee totaled 800,000 KRW, with an additional 100,000 KRW for the cart fee. The combined meal expenses?including lunch at the start house before golf, snacks at the halfway house, and dinner at the golf course after playing?amounted to 777,000 KRW. Additionally, 150,000 KRW was spent on gifts purchased at the pro shop, bringing the total to 1,827,000 KRW. Even excluding the caddie fee of 150,000 KRW paid in cash on-site, the cost per person for one round of golf exceeded 450,000 KRW. The payment was made using a corporate card.

Although criticism is mounting that Korea’s golf course fees, among the highest in the world, are excessive, the fees show little sign of decreasing. On the surface, the increase in golf population appears to have driven up golf course fees significantly, but behind this is the rise in entertainment golf since 2020, triggered by the government raising the deductible limits for entertainment expenses (business promotion expenses) during COVID-19 to stimulate the domestic economy.

Significant Increase in Golf Course Corporate Card Sales Since the 2020 Corporate Tax Law Amendment

According to the latest data from the Korea Golf Consumer Agency on the 21st, corporate card spending at golf courses surpassed 2 trillion KRW for the first time in 2022. From 2013 to 2019, corporate card spending at golf courses hovered around the 1 trillion KRW mark, but it surged sharply starting in 2020. The amounts were 1.5195 trillion KRW in 2020, 1.916 trillion KRW in 2021, and 2.1625 trillion KRW in 2022. This represents a 67.7% increase compared to 1.2892 trillion KRW in 2019, when COVID-19 began. The proportion of corporate card sales in golf courses also reached 27.9%, approaching one-third of total sales.

The amendment to the Corporate Tax Act, effective from January 2020, is considered the main factor that increased corporate card usage by nearly 1 trillion KRW in a short period. The amendment raised the deductible limit for entertainment expenses, increasing the amount of entertainment expenses that could be accounted for as costs, thereby expanding the allowable limit for entertainment golf paid by corporate cards. At that time, the government loosened the entertainment expense limits as part of economic stimulus measures in response to the sharp contraction of the domestic economy due to COVID-19.

Corporate tax is levied on the income calculated by subtracting deductible expenses, which include losses and costs, from a company's revenue. Even companies with the same revenue pay less corporate tax if they have higher deductible expenses. The Corporate Tax Act recognizes deductible entertainment expenses only up to a certain limit based on revenue. The deductible limit for entertainment expenses is calculated by adding a basic deduction limit and a revenue-based limit for each company. The basic deduction limit is 12 million KRW for general companies and 36 million KRW for small and medium-sized enterprises (SMEs). The SME deduction limit, which was 24 million KRW until 2019, increased to 36 million KRW after the 2020 amendment.

The revenue-based limit has been calculated by applying a base limit and an additional limit based on a certain percentage of revenue, categorized by company size. The categories are companies with revenue up to 10 billion KRW, companies with revenue between 10 billion and 50 billion KRW, and companies with revenue exceeding 50 billion KRW. For companies with revenue up to 10 billion KRW, the base limit was increased from 0.2% of revenue to 0.3% after the 2020 amendment. No additional limit percentage applies to companies in this category.

For companies with revenue between 10 billion and 50 billion KRW, the base limit increased from 20 million KRW to 30 million KRW. Additionally, the additional limit percentage, which was 0.1% of revenue exceeding 10 billion KRW, was raised to 0.2%. For companies with revenue exceeding 50 billion KRW, the base limit rose from 60 million KRW to 110 million KRW, while the additional limit percentage remained at 0.03% of revenue exceeding 50 billion KRW.

For example, an SME with 10 billion KRW in revenue had an entertainment expense limit of 44 million KRW until 2019, combining the basic deduction of 24 million KRW and the revenue-based limit of 20 million KRW. From 2020, this increased to 66 million KRW. For companies that previously had to split golf course expenses exceeding the deductible limit into other categories such as welfare expenses or advertising expenses, this significantly reduced their burden.

Growth of Entertainment Golf Since COVID-19

As indoor gatherings were restricted due to COVID-19, major entertainment venues shifted en masse to golf courses. With the increased corporate card limits, all golf expenses?including green fees, gifts, and meals?were paid by corporate cards, greatly increasing corporate card spending at golf courses. As customers gathered to the point that reservations became difficult, golf courses raised green fees and food and beverage prices.

The average weekday green fee at domestic golf courses rose 31.5% in just four years, from 134,000 KRW in 2020 to 177,000 KRW in 2023. Weekend green fees increased 22.1%, from 181,000 KRW to 221,000 KRW. Although green fees have slightly decreased this year, they remain very expensive compared to 2020. As of last month, the average weekday green fee at 18-hole public golf courses in Korea was 169,600 KRW, and the weekend fee was 213,700 KRW. This is over 24% more expensive than the average green fee of 15,342 yen (approximately 134,500 KRW) at golf courses around Tokyo, according to the Japan Golf Course Operators Association.

As a result, there are calls that eliminating entertainment golf would lead to a decrease in skyrocketing green fees and expensive food and beverage prices at golf courses. To promote the use of public golf courses, it is argued that the excessively high deductible limits for entertainment golf expenses should be lowered.

Seochunbeom, Director of the Korea Golf Consumer Agency, stated, "For the sound development of the domestic golf industry, corporate card expenses used at golf courses should not be recognized as deductible expenses except for employee welfare purposes." He advised, "If corporate card expenses are not recognized as deductible expenses, the 5.69 million golfers will benefit the most." He added, "Japan also achieved soundness by not recognizing corporate card expenses at golf courses as deductible expenses."