Business Leaders Say "Tax Policies Desired from New Government Are to Support Economic Growth"

[Asia Economy Reporter Jeong Dong-hoon] Business leaders have identified 'supporting economic growth' as the top priority direction for tax policy under the new government.

The Korea Chamber of Commerce and Industry (KCCI) announced on the 20th that in a survey of 252 domestic company CEOs on 'tax system improvement tasks desired from the new government,' 70.2% of respondents selected supporting economic growth as the highest priority.

This was followed by 'support for business structure reorganization' (16.3%) and 'securing tax revenue to support COVID-19 damage relief' (6.7%).

Business leaders also proposed increasing tax revenue through economic growth rather than tax hikes as a way to secure fiscal resources for welfare and other needs.

Regarding effective methods of securing funds, 70.6% (multiple responses allowed) answered 'increasing tax revenue through economic growth.' In contrast, only 4.4% responded with 'securing tax revenue through tax increases.'

Responses for 'enhancing the effectiveness of fiscal spending' accounted for 54.4%, 'revising various tax exemptions and reductions' for 32.1%, and 'promoting private donations through expanded tax support for contributions' for 10.7%.

The KCCI explained, "South Korea ranks first among OECD countries in the rate of increase in welfare expenditure, and the low birthrate and aging population are accelerating. Accordingly, many CEOs believe that rather than raising tax rates immediately to collect more taxes in the short term, it is more effective to grow companies from a long-term perspective and steadily collect taxes."

Based on the survey results, the KCCI introduced the 'three major tax policy directions desired by CEOs.'

For economic growth support tasks, 'reducing corporate tax rates including corporate income tax' (27.8%) was ranked first, followed by 'expanding tax support for investment and startups' (24.7%), 'revising excessively high corporate tax systems compared to competing countries' (19.8%), and 'supplementing the business succession system' (15.0%).

For tax policies supporting business structure reorganization such as digital transformation and carbon neutrality, proposals included 'strengthening tax support for R&D and facility investment related to eco-friendly technologies' (43.7%), 'restructuring into environmentally friendly energy taxes' (29.4%), 'strengthening tax support for eco-friendly consumption such as electric vehicles' (19.8%), and 'strengthening taxation on companies not complying with eco-friendly policies' (7.1%).

Regarding tax support systems related to national strategic technologies and new growth technologies, 'expanding the scope of recognized costs such as R&D labor expenses' (39.3%) was considered most important, followed by 'relaxing strict support requirements' (25.4%) and 'switching the scope of supported technologies to a negative list system' (22.2%).

Additionally, domestic CEOs most frequently proposed 'expanding tax support for companies that create and maintain employment' (52.9%) as the policy the new government should prioritize to support COVID-19 damage relief.

Next were 'expanding direct tax reductions such as special tax cuts for small and medium enterprises' (30.3%), 'expanding tax support related to business restructuring and reorganization' (9.9%), and 'extending the retroactive deduction period for SME losses' (6.9%).

Kim Hyun-soo, Director of Economic Policy at KCCI, said, "While expanding welfare spending is inevitable, steady growth of companies is the best welfare policy," adding, "We hope that instead of symptomatic corporate tax hikes, tax policies that support corporate growth will be implemented."

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