Tax Reform Focused on 'Gamse'... Easing Public Anxiety and Boosting Corporate Vitality

Deputy Prime Minister for Economy Choo Kyung-ho Attends Tax Law Revision Talks "Enhancing Corporate Tax Competitiveness"
Corporate Tax Reduction and Relief on Succession Burden for Mid-sized Companies
Income Tax Burden Also Eased... Improvement of Punitive Real Estate Tax System

Deputy Prime Minister for Economy Choo Kyung-ho is delivering opening remarks at the 2022 Tax Reform Plan Party-Government Consultation held at the National Assembly on the 18th. Photo by Yoon Dong-joo doso7@

[Asia Economy Sejong=Reporter Kwon Haeyoung] The ruling People Power Party and the government have focused the core of the tax law amendment announced on the 21st on 'tax cuts' such as corporate tax and income tax. This is based on the judgment that it is urgent to alleviate the livelihood anxiety of the lower and middle classes, which has been exacerbated by the complex economic crisis, and to enhance the vitality of the private market, which has sharply declined over the past five years, thereby raising the potential growth rate. The comprehensive real estate tax, which has been criticized for being politically biased and fueling social conflicts, will also be reformed to normalize the abnormal tax system. The People Power Party emphasized that since the tax law amendment announced by the government is not just about modifying a few laws but about overhauling the entire tax system, it will be a 'tax system reform' rather than a simple 'tax law amendment.'

On the morning of the 18th, Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho attended a party-government meeting held at the National Assembly to discuss this year's tax law amendment direction, stating, "We will enhance the vitality of the private sector, companies, and markets through a rational reorganization of the tax system in line with global standards and tax principles." He added, "In particular, we focused on improving the corporate tax system to enhance corporate tax competitiveness, revising regulatory taxes, and resolving difficulties in business succession."

The core of this tax law amendment is the reduction of corporate tax. Previously, the Ministry of Economy and Finance announced through the new government's economic policy direction that the top corporate tax rate would be lowered by 3 percentage points from the current 25% to 22%, and the four-tiered taxable income brackets would be simplified. The average top corporate tax rate among the 38 member countries of the Organisation for Economic Co-operation and Development (OECD) is 21.5%, which is 3.5 percentage points lower than Korea's. Only three countries, including Korea, apply a progressive tax rate system by dividing taxable income brackets into multiple tiers. Although tax revenue may decrease immediately, the government's policy is to create a business-friendly environment by enhancing tax competitiveness and establishing a virtuous cycle of 'investment → employment → growth.'

Measures to reduce the burden of business succession for medium-sized and small enterprises are also expected to be included. Sung Il-jong, the policy chief of the People Power Party, said, "Many medium-sized and small enterprises still face difficulties in business succession due to high inheritance tax burdens, and we have requested the government to address this." He added, "A revolutionary improvement in business succession-related systems can boost economic vitality, and it is especially necessary for advanced industries and technology-intensive industries."

The tax law amendment is also expected to include revisions to income tax brackets and an increase in the non-taxable limit for meal allowances for office workers, aimed at the lower and middle classes suffering from real income reductions due to the three highs (high inflation, high interest rates, and high exchange rates). Policy Chief Sung said, "The income (taxable) brackets will widen, lowering tax rates and expanding the tax-exempt range." This suggests the possibility of adjusting income tax brackets, which have hardly changed in 15 years. Since 2008, prices have risen by more than 30%, but the income tax bracket of 'below 88 million won' has remained unchanged, leading to criticism of a 'silent tax increase.' There is also room for additional cuts in the fuel tax, which has already been lowered to the legal maximum rate of 37%.

Furthermore, real estate tax system improvements, including the comprehensive real estate tax (Jongbu Tax), which has been regarded as punitive taxation, are expected to be included. Policy Chief Sung indicated, "The real estate tax system, which has been used for real estate market management purposes and operated punitively, now needs to be normalized," hinting at reforms to the comprehensive real estate tax. Earlier, the government announced in the new government's economic policy direction that it would prepare reform plans for the comprehensive real estate tax, including rate reductions to restore the burden of holding taxes to an appropriate level.

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