Both Ruling and Opposition Parties Propose Bills to Legitimize 'Jeopdaebi' as 'External Activity Expenses' and 'Corporate Activity Promotion Expenses'

[Asia Economy Reporter Park Cheol-eung] Both ruling and opposition parties in the political sphere have proposed bills to change the name of 'entertainment expenses' in order to alter its negative image. These measures aim to stimulate the domestic economy, and there is also a bill to raise the accounting limit for entertainment expense deductions.

Democratic Party lawmaker Kim Byung-wook recently introduced amendments to the Corporate Tax Act, Income Tax Act, Restriction of Special Taxation Act, and Value-Added Tax Act to change the corporate accounting term 'entertainment expenses' to 'external activity expenses.'

Kim explained, "Since these are costs used for normal business activities of companies, the amendment seeks to prevent unnecessary misunderstandings caused by the term and increase the transparency of entertainment expenses, thereby aiming to boost the domestic economy and secure fiscal revenue." As of 2019, corporate entertainment expenses amounted to 11.1641 trillion KRW, with small and medium-sized enterprises accounting for 70% of the spending.

Kim serves as the head of the professional division in Lee Jae-myung's campaign, and the bill also lists Jeong Seong-ho, the chief special advisor and a key figure in the campaign, as a co-sponsor. Gyeonggi Province Governor Lee Jae-myung has emphasized that he was ranked first in a survey of 'pro-business metropolitan governors' selected by corporate executives. Besides Democratic Party lawmakers, Kim Ye-ji of the People Power Party is also a notable co-sponsor.

Earlier, on the 27th of last month, People Power Party lawmaker Song Eon-seok proposed bills to rename entertainment expenses as 'corporate activity promotion expenses.' He explained, "Increased consumption through active business activities by companies will greatly help small business owners and self-employed individuals."

The bills also include raising the legal limit for entertainment expenses. Currently, companies with revenue up to 10 billion KRW can deduct 0.3%, those with 10 to 50 billion KRW can deduct 0.2%, and those exceeding 50 billion KRW can deduct 0.03% of entertainment expenses as deductible costs. The proposal raises these limits to 0.5%, 0.3%, and 0.05%, respectively.

From the same party, lawmaker Baek Jong-heon introduced an amendment to the Restriction of Special Taxation Act last month to raise the deductible limit for entertainment expenses for small and medium-sized enterprises. He stated, "This aims to support the resolution of management difficulties faced by SMEs due to COVID-19 and to promote the domestic economy through increased corporate consumption."

According to a survey conducted in March by lawmaker Kim and the Korea Federation of SMEs targeting 527 small and medium-sized enterprises, 62.4% responded that expanding the scope and limit of recognized entertainment expenses was the preferred improvement measure for the entertainment expense system.

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