Deputy Prime Minister Hong: "Digital Tax Implementation Will Slightly Increase Tax Revenue"

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, is being interviewed on the 14th (local time) in Washington immediately after the G20 Finance Ministers' Meeting.

[Washington D.C. (USA) = Asia Economy Reporter Son Seon-hee] Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, said on the 14th (local time), "The government believes that combining Pillar 1 (allocation of taxing rights to countries where revenue is generated) and Pillar 2 (global minimum tax) of the digital tax will have a slight positive (+) effect on tax revenue."

After attending the G20 Finance Ministers' Meeting held in Washington D.C. on the same day, Deputy Prime Minister Hong met with local correspondents and accompanying reporters and, when asked about the impact of the digital tax introduction on tax revenue, said, "Pillar 1 will inevitably cause a tax revenue decrease of several hundred billion won, but Pillar 2 will result in an increase of several hundred billion won."

On the 9th, the OECD and G20 Inclusive Framework (IF) agreed on a digital tax introduction plan that grants global companies 25% of taxing rights to the countries where revenue is generated and applies a 15% global minimum tax rate.

The target companies are those with consolidated revenue of 20 billion euros (approximately 27 trillion won) or more and an operating profit margin of 10% or higher. Among domestic companies, Samsung Electronics and SK Hynix are expected to be included. Deputy Prime Minister Hong stated, "Among about 100 companies subject to the digital tax, only one or two Korean companies will need to allocate taxation overseas," adding, "On the other hand, there will be about 80 large platform companies operating in Korea, regardless of their size."

From the companies' perspective, only the country paying the tax changes, so the existing tax burden remains neutral. However, from the government's perspective, some of the taxes paid by global companies must be allocated to overseas revenue-generating countries, making a decrease in tax revenue inevitable.

Deputy Prime Minister Hong said, "Pillar 1 will act as a short-term factor for tax revenue reduction, but variables such as the growth rate of the relevant industry and the policy response of the respective countries will come into play," and added, "Although it will act as a short-term tax revenue reduction factor, it is expected to turn positive from 2025 to 2030."

He continued, "Since other countries will raise corporate taxes or adjust the minimum corporate tax under Pillar 2, the surplus factor from Pillar 2 will gradually decrease over time," adding, "There are many variables, so it is still difficult to accurately predict the tax revenue effect."

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