"Reducing 5G Investment Burden? Support Measures Insufficient, License Tax Relief Excludes Seoul Metropolitan Area"

[Asia Economy Reporter Joesulgina] The government's repeatedly promised investment incentives to expedite the establishment of the 5G network, a core infrastructure of the 'Digital New Deal,' have ultimately resulted in a 'half-hearted' outcome. The proposal to increase the 5G tax credit rate was not included in the tax law amendment bill, and the exemption plan for registration license tax on base stations excluded the most crucial metropolitan areas. The currently implemented tax credit is also set to expire at the end of this year, raising criticism that the government is merely taking credit while shifting the burden of 5G infrastructure construction onto the private sector. This contrasts sharply with countries like the UK, Japan, and China, where the government has actively and extensively supported efforts to secure 5G leadership.

◆ Promised to Build a 5G Expressway... Disappointing Support Measures

According to industry sources on the 19th, the Ministry of the Interior and Safety recently announced a legislative notice for the 'Partial Amendment to the Local Tax Special Cases Act,' which includes a provision to reduce the registration license tax by 50% for 5G wireless station licenses until December 31, 2023, to lay the foundation for the 4th Industrial Revolution. However, the amendment includes the phrase 'outside the densely regulated areas.' This means that the metropolitan area, including Seoul, Incheon, and Gyeonggi Province, where initial investments are concentrated, as well as the six major metropolitan cities' densely regulated areas, will receive no tax reduction benefits for new 5G base stations.

This outcome is a step backward compared to the investment support measures promised earlier this year by the Ministry of Science and ICT, the lead ministry, and related departments on the second anniversary of 5G commercialization. The original plan to encourage companies to expand 5G investment by reducing license tax burdens has inevitably been disrupted. An industry official expressed regret, saying, "Contrary to what the government announced, the amendment excludes the most important metropolitan area," and added, "The scale of support has shrunk to about 15 billion KRW over three years."

The government's initially announced 5G investment support measures were broadly summarized into two categories: ▲ additional 5G tax credits and extension of sunset provisions ▲ registration license tax reductions for base stations. Accordingly, the Ministry of Science and ICT had been pushing for an amendment to the Restriction of Special Taxation Act to allow a basic reduction of up to 3% of the corporate tax for the relevant year, with an additional 1% if employment growth by the investing company was confirmed. However, this was not included due to opposition from the Ministry of Economy and Finance, which was concerned about tax revenue losses. Even the announced investment promotion plan did not reflect any regulations related to the metropolitan area, leading to repeated criticism that it remains ineffective as it was last year.

Especially considering that Minister Choi Ki-young met with the heads of the three major telecom companies immediately after the Digital New Deal announcement and reiterated such support measures while requesting expanded 5G investment, the result appears to be all talk and no action. At that time, despite the debt burden from large-scale investments, the three telecom companies expressed agreement on the importance of the Digital New Deal and responded with a commitment of 25 trillion KRW over three years.

A Ministry of Science and ICT official stated, "We will convey the Ministry's position during the public consultation period for the amendment to the Local Tax Special Cases Act, which ends on September 1," and added, "We are continuing discussions to ensure that the additional 5G tax credit content is reflected in the Restriction of Special Taxation Act amendment through inter-ministerial consultations." The three telecom companies also plan to submit their opinions regarding the Local Tax Special Cases Act to the Ministry of the Interior and Safety.

◆ Korea Relies Solely on Private Investment, Contrasting with Overseas

There is growing consensus that relying solely on private investment is no longer viable to rapidly build the so-called 'data highway' 5G network and to activate new 5G industries. Given the prolonged COVID-19 pandemic, active policies such as 5G investment incentives and budget allocations are essential to attract corporate investment.

Overseas, governments are taking the lead in investment. In the United States, a government-led support fund has been established to build suburban 5G networks, and subsidy support legislation has also been proposed. The UK offers a 100% property tax exemption for five years related to 5G investment. Japan has proposed a 15% tax credit bill and decided to invest 7.8 billion KRW in national funds.

In contrast, Korea maintains a stance of not allocating government budget for 5G network construction. At the end of last month, Minister Choi, attending the National Assembly's Science, ICT, Broadcasting and Communications Committee briefing, drew a line by stating, "There is no particular need to support with government budget. We are considering policies that provide tax benefits or attract private investment."

However, even the currently implemented tax benefits have not yet been extended and are set to expire at the end of this year. Additionally, the amendment to the Housing Act Enforcement Decree by the Ministry of Land, Infrastructure and Transport, which requires the consent of two-thirds or more of residents and local governments when telecom companies build 5G base station communication equipment, is also cited as a barrier hindering the spread of 5G.

This content was produced with the assistance of AI translation services.