Ando Geol: "Foreign Multinational Corporations' Corporate Tax Revenue Among the Lowest in OECD"

South Korea's Corporate Tax Share at 7%... One-Third of OECD Level
"Need to Introduce Digital Services Tax to Prevent Tax Avoidance"

Assemblyman Ando-geol making an inquiry.
[Photo by Assemblyman Ando-geol's Office]

The proportion of corporate tax revenue paid by foreign multinational corporations operating in South Korea was found to be only 7%. Considering the OECD average (unweighted) is 22%, Korea’s figure is less than one-third of that level.

On the 17th, Ahn Do-gul, a member of the Democratic Party of Korea (Gwangju Dongnam-eul), analyzed OECD corporate tax statistics and found that the share of corporate tax revenue paid by foreign multinational corporations in Korea remained at around 7%. This contrasts sharply with countries classified as tax havens, such as Ireland (79%), Hong Kong (56%), and Singapore (55%), where the share of corporate tax revenue from foreign multinationals exceeds 50%.

In fact, Google, a representative multinational corporation, is suspected of avoiding corporate tax by transferring app market revenues generated in Korea to Google Asia Pacific located in Singapore. Analyzing 10 years of top 1,000 Google Play app sales data from Data.AI, Ahn found that app market revenues reached at least 6.5 trillion KRW by August this year and are projected to reach 6.9 trillion KRW by the end of the year.

To address this issue, OECD member countries are currently negotiating “Pillar 1” of the digital tax, which involves allocating 25% of profits above a certain threshold to the country where the revenue is generated. However, due to opposition from the United States, agreement has been delayed, making legislation unlikely in the near term. Consequently, some countries have independently introduced provisional alternatives such as digital services taxes that impose 2-3% taxes on global sales.

Ahn emphasized, “There should be a system imposing reporting obligations on law firms and accounting firms that establish or recommend tax avoidance strategies,” and added, “The government should actively consider imposing fines with the nature of enforcement penalties if reporting obligations are not met.”

Meanwhile, alongside tax avoidance by multinational corporations, issues related to tax appeals have also emerged. Last year, in tax administrative lawsuits involving amounts exceeding 10 billion KRW, the National Tax Service’s loss rate reached 42%. This is four times higher than the overall average loss rate of 9.5%.

Ahn stressed, “Since the National Tax Service’s loss rate is high in large lawsuits involving multinational corporations, it is necessary to enhance litigation capabilities.”