National Assembly Budget Office: "Carbon Tax Reduction Needed for High Carbon Emission Companies like POSCO"

"Benchmarking Nordic Countries That Collect Carbon Tax While Reducing Direct Taxes, Income Tax, and Corporate Tax"

On December 7 last year, Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance (center), is seen briefing on the 2050 Carbon Neutrality Promotion Strategy. From the left, Choi Ki-young, former Minister of Science and ICT; Sung Yun-mo, former Minister of Trade, Industry and Energy; Deputy Prime Minister Hong; Cho Myung-rae, former Minister of Environment; and Koo Yun-cheol, Director of the Office for Government Policy Coordination. Photo by Kang Jin-hyung aymsdream@

[Sejong=Asia Economy Reporter Moon Chaeseok] An analysis by the National Assembly has suggested that to prevent a sharp decline in operating profit margins and tax resistance in high carbon-emitting industries such as petrochemicals and steel after the introduction of a carbon tax, reductions in direct taxes, income tax, and corporate tax should be implemented. It also advised that carbon tax reductions should be concurrently applied to companies allocated greenhouse gas emission permits, such as POSCO, Shinsegae, and Kumho Express.

On the 1st, the National Assembly Budget Office introduced in its report titled "Trends in Carbon Tax Discussions" that even in Northern Europe, where the carbon tax was introduced early, the tax burden from other tax items was alleviated, allowing the carbon tax to be collected without difficulty. The report presented cases to refer to in order to prevent risks such as a sudden increase in tax burden, overlapping regulations with the emissions trading system, and tax resistance, which are expected after the introduction of the carbon tax.

According to the report, Northern European countries combined the imposition of the carbon tax with reductions in direct taxes. Finland reduced income tax when introducing the carbon tax, Sweden combined corporate tax cuts with income tax reductions for low- and middle-income groups, and Denmark lowered the existing energy tax and reduced income tax, sales tax, and corporate tax.

Notably, Sweden and Denmark reduced the carbon tax for companies subject to the greenhouse gas emissions trading system. In Korea, companies with high carbon emissions such as POSCO, Shinsegae, and Kumho Express fall into this category. In December last year, the Ministry of Environment selected 684 companies, including POSCO (industry sector), Shinsegae (buildings), and Kumho Express (transportation), as emission permit allocation companies for the third phase (2021?2025) of the greenhouse gas emissions trading system.

The Budget Office emphasized that when imposing a carbon tax on high carbon-emitting industries such as petrochemicals and steel, additional measures are needed to alleviate risks such as a decline in operating profit margins due to product price increases and increased facility investment costs. It also warned that the introduction of a carbon tax could raise the issue of regressivity, where lower-income individuals bear a heavier tax burden. Therefore, it suggested the need to implement measures such as carbon tax reductions or rate cuts for low-income groups and using the increased tax revenue from the carbon tax to support low-income households.

Additionally, the report introduced opinions including ▲ converting the "Transportation, Energy, and Environment Tax Act," which will be abolished in January next year, from a purpose tax to a general tax and incorporating it into the general account ▲ maintaining the purpose tax nature of the transportation, energy, and environment tax while separating it into transportation tax and environmental tax (carbon tax).

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