7 out of 10 Small and Medium Enterprises Say "Minimum Tax Rate Reduction Needed"

Korea Federation of SMEs '2021 Survey on Taxation and Tax Administration'

A small and medium-sized manufacturing company located in Gimpo, Gyeonggi.
Photo by Lee Jun-hyung

[Asia Economy Reporter Lee Junhyung] Seven out of ten small and medium-sized enterprises (SMEs) (70.4%) feel the need to lower the minimum tax rate.

The Korea Federation of SMEs announced on the 23rd that a survey conducted from the 17th of last month to the 6th of this month targeting 500 SMEs on the '2021 Tax and Tax Administration Survey' revealed these results. According to the survey, 33.2% of SMEs responded that tax support systems help their management. Meanwhile, 20.2% of SMEs said the support was not helpful.

The main reason why tax support systems were not helpful was 'not receiving any tax support benefits at all (57.4%)'. Among the SMEs that did not receive benefits, 31% answered that they 'did not apply because they were unaware of the system.' Only 31.8% of SMEs had received the representative tax reduction system, the 'Special Tax Reduction Support for SMEs.' Among the SMEs that did not receive this special tax reduction support, 32% cited 'complex preparation documents and application procedures' as the reason. Additionally, 22% of SMEs said they could not receive special tax reduction support because the minimum tax rate was capped at 7%.

Reasons Why Small and Medium Enterprises Do Not Receive Tax Support Benefits.
[Photo by Korea Federation of SMEs]

Seventy point four percent of SMEs answered that lowering the minimum tax rate is necessary. Those who said it should be maintained as is accounted for 29.6%. Regarding inheritance tax, which the government is currently reviewing for reform, half of the SMEs (49.6%) responded that it should be maintained as is. Twenty-four percent of companies answered that the top inheritance tax rate should be lowered from the current 50% to 30-40%.

Among the tax law amendments proposed by the government this year, the policy considered most helpful to companies was 'job creation support (57.6%)'. This was followed by 'expansion of the allowable period for loss carryback (26.8%)' and 'expansion of tax support for livelihood startups (9%)'. The tax support areas that should be expanded to revitalize SMEs were 'employment support (52.2%)', 'win-win cooperation (18.2%)', and 'investment promotion (17.8%)'.

Opinions of small and medium-sized enterprises on the government's review of inheritance tax reform.
[Photo by Korea Federation of SMEs]

Additionally, 26.8% of SMEs reported difficulties due to excessive document requests and deposits during tax audits. Other difficulties included 'long-term investigations (20.8%)' and 'unpredictability in target selection (20%)'.

Choomung Gap, Head of Economic Policy at the Korea Federation of SMEs, said, "To enhance tax support for the management stability and employment increase of small-scale SMEs, the minimum tax rate should be lowered from the current 7% to 5%," adding, "We hope for tax policies and administration that can help corporate innovation and growth."

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