The Significance of Bank of Korea's Corporate Tax Surpassing Samsung Electronics and Hynix [News Explanation]

Bank of Korea Overtakes Global Export Giants in Corporate Tax Payments
U.S. Stock Market Rally, High Exchange Rates, and Rate Cuts Drive Profits
Semiconductor Downturn Slashes Corporate Taxes for Samsung and SK Hynix
Three Consecutive Years of Declining Corporate Tax Revenue Lead to 'Tax Revenue Shortfall'

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The Bank of Korea recorded nearly 8 trillion won in net income this year, benefiting from the booming U.S. stock market and high exchange rates, proudly entering the '2 trillion won corporate tax club' again this year. However, due to economic sluggishness, the corporate tax payments from large corporations that have driven the growth of the Korean economy are expected to be lower or similar to this amount, raising concerns that signals of a real economy crisis have been detected.

According to the Bank of Korea's '2024 Annual Report,' the Bank posted net income of 7.8189 trillion won last year, the second highest ever, and paid 2.5782 trillion won in corporate tax. This amount is five times that of the previous year (501.8 billion won), thanks to increased foreign currency asset management income amid the global stock market boom. The Bank of Korea also paid corporate taxes in the 2.8 trillion won range in 2020 and 2021.

A high corporate tax payment generally indicates good corporate performance. It is considered an indirect indicator of a company's management results and economic power. The Bank of Korea began paying corporate tax in 1981 when the government started taxing public corporations. Although it is a public corporation, it is subject to the same tax base and rates as general corporations.

The increase in the Bank of Korea's corporate tax payments is a positive for national finances, as corporate tax is a significant source of government revenue. However, the fact that the Bank of Korea's corporate tax burden exceeds that of Korea's leading large corporations is interpreted as a sign of poor corporate performance amid economic downturn. Large corporations such as Samsung Electronics, SK Hynix, and Hyundai Motor Company, once known as the domestic 'corporate tax big 3,' are now ceding the crown of corporate tax payments to the Bank of Korea.

Samsung Electronics, which had long been the top corporate tax payer, significantly influenced national corporate tax revenue. In 2022, corporate tax revenue surpassed 100 trillion won for the first time, increasing by 47% compared to the previous year, backed by Samsung Electronics' solid performance. During the semiconductor boom in 2021, Samsung Electronics earned 51.6 trillion won, with operating profit increasing by 19% compared to the previous year.

In 2018 (tax year 2017), when the top corporate tax rate for large corporations was raised from 22% to 25%, Samsung Electronics' corporate tax payment jumped to 14 trillion won. At that time, other companies' corporate tax payments also increased, pushing corporate tax revenue from the 50 trillion won range to the 70 trillion won range in the same year. During the semiconductor boom in 2019, Samsung Electronics' corporate tax payment reached 16.8 trillion won (based on consolidated financial statements), marking the largest amount ever paid by a single company. Although the amount decreased to 8.69 trillion won in 2020 due to poor performance, it increased again from 9.93 trillion won in 2021 to 13.44 trillion won in 2022 and around 9.21 trillion won in 2023, hovering near 10 trillion won.

Samsung Electronics disappeared from the rankings in 2023 after recording a massive loss of over 11 trillion won due to the semiconductor downturn. The company did not pay any corporate tax last year, marking the first time in 52 years since it began paying corporate tax after turning a profit in 1972. Although it recorded an operating profit of 12.4 trillion won last year, applying various deductions such as carried-forward losses is expected to reduce this year's tax payment to just a few billion won.

SK Hynix, which had paid corporate taxes in the 2 to 3 trillion won range, also failed to pay corporate tax last year after recording an operating loss of 7 trillion won in 2023. Thanks to expanded demand for high-bandwidth memory (HBM) this year, it is expected to post an operating profit of about 21 trillion won and pay corporate tax in the 2 trillion won range. Hyundai Motor Company's corporate tax has increased by 1 trillion won annually, surpassing 2.7 trillion won in 2022 and reaching 3.6966 trillion won last year. The current corporate tax liability on Hyundai Motor's financial statements, an indicator of the company's expected tax payment this year, stands at 1.66 trillion won.

Dr. Yoo Seung-min, a former member of the People Power Party and an economist, recently stated on his social media, "This is a crisis in the real economy," adding, "The Bank of Korea surpassed major corporations such as Samsung Electronics, Hyundai Motor, and SK Hynix to become the top corporate tax payer last year. This absurd figure is unprecedented."

A decrease in corporate tax payments affects the total national tax revenue. Last year, domestic corporate tax payments dropped to 62.5 trillion won from 80.4 trillion won the previous year, reducing total national tax revenue and causing a so-called 'tax revenue shortfall.' Annual national tax revenue last year was 336.5 trillion won, down 7.6 trillion won from 344.1 trillion won the previous year, and about 30 trillion won less than the Ministry of Economy and Finance's initial estimate of 367 trillion won. The share of corporate tax in total national tax revenue also fell from 23.3% in 2023 to 18.6% last year.