Raised the Top Tax Rate to 25%... 330 Trillion Won in Corporate Taxes Collected Over 5 Years of Moon Administration

2021 Fiscal Year Total Revenue and Total Expenditure Closing Results

[Asia Economy Sejong=Reporter Son Seon-hee] Despite the prolonged COVID-19 pandemic, corporate tax revenue collected last year exceeded 70 trillion won. As a result, the total corporate tax collected over the five years since the Moon Jae-in administration began in 2017 reached 330 trillion won. There are concerns that the corporate tax burden ratio relative to the Gross Domestic Product (GDP) is excessively high, indicating the need for adjustment by the next government.

According to the "2021 Fiscal Year Total Revenue and Expenditure Closing Results" announced by the Ministry of Economy and Finance on the 11th, the annual corporate tax revenue last year was recorded at 70.3963 trillion won. This is an increase of 14.8831 trillion won compared to 2020 (55.5132 trillion won), approaching the all-time high of 72.2 trillion won in 2019.

The government initially forecasted that corporate tax revenue would decrease to the 53 trillion won range last year due to the prolonged COVID-19 crisis. However, the economic recovery progressed faster than expected, and an unprecedented export boom occurred, resulting in a significant increase. Furthermore, when considering the deferred payments granted to small and medium-sized enterprises and small business owners who suffered due to the COVID-19 situation last year?allowing them to postpone corporate tax payments that were due at the end of the year to early this year?the actual corporate tax revenue is estimated to be the highest ever.

Corporate tax revenue was around 52.1 trillion won (settlement basis) in 2016, increased to 59.2 trillion won in 2017, the first year of the Moon Jae-in administration, and then surged to 70.9 trillion won the following year. Subsequently, in 2019, corporate tax revenue reached an all-time high of 72.2 trillion won.

Looking at the corporate tax burden ratio relative to GDP, as reported by the Organisation for Economic Co-operation and Development (OECD) during the same period, Korea's burden ratio rose significantly from 3.4% in 2016 to 4.3% in 2019. This is a very high level compared to the OECD average (2.9% in 2016 and 3.0% in 2019). Such a steep rise in corporate tax indicates an increasing burden on companies. The Moon Jae-in administration raised the top corporate tax rate to 25% shortly after taking office. In particular, when examining not only the overall scale of corporate tax but also the detailed components, there has been an increase in tax exemptions and reductions for small and medium-sized enterprises, raising concerns about violations of tax equity principles.

Kim Hak-soo, head of the Fiscal and Social Policy Research Department at the Korea Development Institute (KDI), explained, "Compared to OECD countries, Korea's corporate tax burden ratio is among the highest," adding, "Taxation on corporations is relatively strong compared to other tax categories." He continued, "Given the poor fiscal conditions, it is difficult to lower tax rates, and institutionally, many small corporations benefit from exemptions and reductions, placing the burden on large corporations. Fundamentally, there is a need for a 'single tax rate reform' to address the differential tax rates on profit-making corporations, but it is difficult under the current government, and it is uncertain whether the next government will be able to implement it."

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