"Tax Support for Content Production Costs Generates 1.8 Trillion Won in Economic Impact Over 4 Years"

[Asia Economy Reporter Lim Hye-seon] A study has found that expanding the tax credit rate for content production costs would generate economic effects such as production of 1.871 trillion KRW, added value of 746 billion KRW, and employment of 9,922 people over the next four years. The increase in the tax credit rate was applied at about twice the current rate, assuming the average increase rate proposed in the amendment to the Restriction of Special Taxation Act currently submitted to the National Assembly (7% for large corporations, 13% for medium-sized enterprises, and 18% for small and medium enterprises).

The 'Policy Seminar on Tax Support for Broadcasting Content Production Costs to Respond to Global OTT Entry and Develop the Domestic Media Industry,' co-hosted by Lee Sang-heon of the Democratic Party and Hong Seok-jun of the People Power Party and organized by the Aviation Broadcasting Channel Promotion Association, was held on the 26th.

Domestic Content Production Cost Tax Credit Rate One-Tenth of Advanced Countries

Kim Yong-hee, a research fellow at Open Route, analyzed at the seminar that while most overseas countries operate high-rate tax credit systems for content production costs to enhance economic effects such as fostering the content industry and creating employment, South Korea’s tax credit rate is about one-tenth of that of major advanced countries.

Researcher Kim cited the UK’s tax support system for video content production as an example, stating that tax support policies create positive economic effects by increasing not only production expenditures but also added value, employment, and tax revenue in the industry. According to the UK case presented by Kim, the total added value created by the industry in 2016 increased by 73% compared to 2013 due to tax support policies, the number of 'full-time equivalent employees' created directly and indirectly increased by 62%, and tax revenue rose by 67%.

Kim Yong-hee expressed the opinion that policy support at the level of advanced countries is essential to continuously grow Korea’s video content industry as a global core soft power. As a specific policy support measure, he suggested extending the sunset clause of the current video content production cost tax support system scheduled for the end of this year and raising the current tax credit rate. He also added that the scope of tax support, currently limited to direct production costs, should be expanded to include production investment costs such as outsourcing production costs, and the application range should be broadened to include online video platform (OTT) content.

K-Content Overseas Popularity Benefits Monopolized by Global OTTs

At the policy seminar co-hosted by Lee Sang-heon and Hong Seok-jun, both lawmakers shared the recognition that the domestic video content production cost tax credit rate is lower than that of major overseas countries and presented alternative opinions for the development of Korea’s video content industry.

Lawmaker Lee Sang-heon said, "Video content is at the center of Korea’s popular culture and arts, which are gaining worldwide attention, and support from the National Assembly and government is essential for the development of the domestic media industry." He added, "I have already introduced the 'Amendment to the Restriction of Special Taxation Act' to expand the tax credit for video content production costs and the 'Amendment to the Act on Promotion of Films and Video' to allow OTT operators to classify video ratings independently, reflecting the changing industrial environment."

Lawmaker Hong Seok-jun pointed out, "Global OTTs guarantee a small margin to domestic producers when investing in and purchasing K-content, but they do not pay additional revenue based on usage. The overseas popularity benefits of K-content are monopolized by global OTTs, and the opportunity to enhance the capabilities of domestic producers through exports is lost, which may become a long-term entrenched structure." He emphasized, "In this situation, tax support for broadcasting content production costs to enhance the global competitiveness of Korea’s broadcasting content industry will play a significant role in the development of the domestic media industry."

Tax Support Target Production Entities Should Be Expanded to OTTs

Recently, an amendment to the Telecommunications Business Act, which provides a legal basis to support domestic OTTs, was passed. The amendment mainly defines OTT as 'value-added communication services that provide video content through information and communication networks.' While the OTT industry welcomes the passage of the bill, it argues that since tax support is limited to production entities, the effect of supporting investment activation in OTT platforms is minimal. An OTT industry official said, "Domestic OTTs are investing heavily and enduring large deficits to strengthen competitiveness, even though it is difficult to fully recover original investment costs," adding, "To align with the purpose of the law amendment, related systems should be supplemented to allow tax support for OTTs’ original investments."

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