[2022 National Audit] Corporate Tax on Unreturned Earnings of Large Corporations Soars 32 Times in 5 Years... Yang Kyung-sook Urges to Halt the Abolition of Dual Taxation System

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[Asia Economy Sejong=Reporter Kim Hyewon] Last year, the corporate tax paid on undistributed earnings by large conglomerate affiliates (mutual shareholding restricted companies) amounted to 269.6 billion KRW. This represents an increase of more than 32 times from 8.4 billion KRW in 2016 over five years.

On the 4th, Yang Kyungsuk, a member of the National Assembly’s Planning and Finance Committee from the Democratic Party of Korea, announced this based on data on corporate tax filings for undistributed earnings received from the National Tax Service. Undistributed earnings refer to income that companies retain in the form of cash or deposits without spending on investments, wages, or dividends.

The number of large corporations paying corporate tax on undistributed earnings increased more than tenfold from 26 companies in 2016 to 299 companies last year. Under current tax law, 20% of undistributed earnings must be paid as corporate tax (Investment and Win-Win Cooperation Promotion Tax). The purpose is to stimulate the economy by encouraging large corporations to channel retained earnings into the market.

The corporate income repatriation tax system, introduced during the Park Geun-hye administration in 2015, was revised to the Investment and Win-Win Cooperation Promotion Tax under the Moon Jae-in administration in 2018 and is scheduled to sunset at the end of this year. The Yoon Suk-yeol administration views the Investment and Win-Win Cooperation Promotion Tax as having limited policy effectiveness and only increasing the burden on companies, and plans to terminate it this year.

Rep. Yang said, "The significant increase in corporate tax on undistributed earnings means that large corporations have been passive in raising wages and converting to regular employment," adding, "The Yoon Suk-yeol administration should halt the abolition of the Investment and Win-Win Cooperation Promotion Tax."

Rep. Hong Sung-guk of the Democratic Party (Planning and Finance Committee) also emphasized, "Whether the Investment and Win-Win Cooperation Promotion Tax exists or not, retained earnings have continued to increase and will continue to do so, but instead of abolishing this system because it does not meet its intended purpose, it should be completely redesigned to fit its objectives," stressing, "In the face of an approaching economic crisis, proactive corporate investment is more urgent than ever."

Based on data requested from the National Assembly Budget Office, Rep. Hong revealed that the retained earnings (capital surplus + earned surplus) of the top 100 companies increased by 395 trillion KRW from 630 trillion KRW in 2012 to 1,025 trillion KRW last year.

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