Unified Call for "Abolition" of Excess Retained Earnings Tax Squeezing SMEs

Junggi Central Association Hosts Policy Meeting with Finance and Economy Committee Tax Subcommittee Chair

Kim Ki-moon, President of the Korea Federation of SMEs. Photo by Asia Economy DB

[Asia Economy Reporter Moon Hyewon] The small and medium-sized enterprise (SME) sector argued that the taxation on excess retained earnings infringes on corporate growth and autonomy and could worsen financial structures, thus it should be abolished.

On the 27th, the Korea Federation of SMEs held a policy discussion on-site regarding the taxation on excess retained earnings, inviting Ko Yong-jin, Chair of the Tax Subcommittee of the National Assembly's Planning and Finance Committee, at the Federation's office in Yeongdeungpo-gu, Seoul. The meeting was organized to discuss issues and improvement measures related to the government's push for taxation on excess retained earnings of individual quasi-corporations (family businesses). Attendees included Kim Ki-moon, President of the Korea Federation of SMEs; Jung Dal-hong, President of the Korea Mechanical Equipment Construction Association; Jung Yoon-sook, President of the Korea Women Entrepreneurs Association; and Ko Gwang-hyo, Income and Corporate Tax Policy Officer at the Ministry of Strategy and Finance.

Gu Jae-i, Director of the Korea Taxpayer Rights Institute and tax accountant, who presented at the meeting, stated, "The corporate excess retained earnings deemed dividend taxation system has legal issues such as taxation on unrealized gains, but a bigger problem is that the victims of this system are small-scale self-employed and SMEs," adding, "The current government proposal needs urgent improvement."

President Kim Ki-moon said, "If SMEs do not sufficiently accumulate internal reserves to respond to changes in the 4th Industrial Revolution, they will inevitably lose competitiveness and disappear," emphasizing, "The policy of taxing excess retained earnings must be withdrawn so that companies do not stop future investments and growth." Chair Ko responded, "I will convey the opinions from the SME field well to the National Assembly," and added, "I will strive during the legislative review process to ensure that companies engaged in normal business activities do not suffer damage."

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