KCCI Proposes Lowering Corporate and Inheritance Tax Rates for Business Competitiveness and Stability

"Requirements for Business Succession Tax Deduction Should Also Be Relaxed... Including Large Corporations and Abolishing Deduction Limits"

[Asia Economy Reporter Yu Je-hoon] There has been a call to lower corporate and inheritance tax rates and ease the requirements for business succession tax deductions to strengthen the global competitiveness of domestic companies and enhance management stability.

The Korea Employers Federation (KEF) announced on the 10th that it submitted business sector opinions on the partial amendment bills of the Corporate Tax Act, Restriction of Special Taxation Act, and Inheritance and Gift Tax Act to the Ministry of Economy and Finance. KEF stated, "The tax law amendment plan announced by the Ministry of Economy and Finance last month is positively evaluated as it focuses on supporting economic recovery through revitalizing domestic demand and improving the business environment," but also pointed out, "However, fundamental improvement measures for tax systems that impose excessive burdens on companies compared to competing countries, such as corporate tax and inheritance tax, are insufficient."

First, KEF emphasized that the top corporate tax rate should be lowered from the current 25% to the OECD average level of 22%. Currently, the top corporate tax rate ranks as the 8th highest among 38 OECD countries, and with recent global discussions on the introduction of 'digital taxes' and others, the tax burden on companies both domestically and internationally is likely to increase further.

In addition, KEF proposed the following regarding corporate tax: ▲expansion of research and development and investment tax credits ▲abolition of differentiated limits on the deduction of carried-forward losses ▲improvement of the foreign tax credit system. KEF stated, "In the new economic environment of the post-COVID-19 era, to foster new industries including corporate investment and job creation, it is necessary to promptly improve the domestic investment environment by lowering the top corporate tax rate and easing various deduction requirements."

Regarding inheritance and gift tax laws, KEF also proposed lowering the inheritance tax rate for business succession and easing the requirements for business succession tax deductions. They argued that the top inheritance tax rate of up to 50% should be lowered to the OECD average (26.5%), and the tax rates ranging from 10% to 50% by taxable income brackets should be reduced to around 5% to 25%, calling for an overall reduction in tax rates.

Furthermore, KEF stated that the business succession tax deduction system should be expanded to include large corporations as well as small and medium-sized enterprises to ensure sufficient utilization by many companies. They also called for the abolition of the deduction ceiling (KRW 50 billion), reduction of mandatory management periods before and after succession, relaxation of employment maintenance requirements, and easing of restrictions on business type changes. Additionally, KEF proposed ▲abolishing the premium valuation on major shareholder shares ▲extending the installment payment period ▲switching the inheritance tax taxation method to an estate acquisition tax method.

Ha Sang-woo, head of KEF’s Economic Research Headquarters, said, "It is positive that support for future strategic technologies such as semiconductors and batteries was strengthened in this year’s tax law amendment plan, but it is quite regrettable that key issues such as lowering corporate and inheritance tax rates and easing business succession tax deduction requirements were not properly reflected." He added, "To improve the domestic investment environment and enhance the sustainability of corporate management, it is urgent to alleviate the corporate and inheritance tax burdens in a way that companies can actually feel."

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