Raise corporate tax, part-time wages cut... KIPF suggests "Need to reconsider effective tax rate"

[Sejong=Asia Economy Reporter Son Seon-hee] An analysis has emerged that companies are passing on some of the burden from corporate tax increases to workers, particularly part-time workers who are vulnerable in wage negotiations. It is suggested that the system should be reconsidered to increase the effective corporate tax rate.

The Korea Institute of Public Finance disclosed these research findings on the 23rd through a report titled "A Study on the Incidence Effect of Corporate Tax Burden Using Industry-Specific Variations." This study empirically analyzed the incidence effect (actual tax burden) of corporate tax on domestic companies.

According to the report, when the marginal corporate tax rate increases by 10%, the wage level of workers is estimated to decrease by 0.27%. This means that if the marginal effective corporate tax rate rises from 10% to 11%, the average wage level decreases by 0.27%. Especially in markets with a competitive structure close to a monopoly, the degree of tax burden pass-through was higher. In a monopoly market structure, when the marginal effective corporate tax rate increases by 10%, individual wage levels decreased by 0.54%.

Furthermore, this tax burden pass-through phenomenon was more clearly observed among part-time workers, who have relatively lower wage negotiation power and more room for adjustment compared to full-time workers, even if they are the same workers.

Research Fellow Kim Bitmaro stated, "Recently, Korea has undergone institutional changes generally increasing the actual burden of corporate tax through nominal rate hikes and reductions in tax expenditures," adding, "It was empirically observed that when companies face corporate tax burdens, they tend to reduce the wage levels of relatively vulnerable worker groups."

He continued, "If part of the corporate tax burden faced by large corporations ultimately falls on relatively vulnerable groups such as part-time workers, this contradicts the policy intent of increasing tax burdens mainly on high-income companies," and suggested, "There is a need to reconsider the policy direction of increasing the effective corporate tax rate institutionally."

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