"K-Content Production Cost Tax Credit Rate Increase Urgently Needed"

Five Content Groups Issue Joint Statement
Netflix and Disney at 25%... Domestic Companies Only 3-10%
"To Sustain K-Content Growth, Increase to 10-20%"

[Asia Economy Reporter Oh Su-yeon] Five organizations, including the Korea Drama Producers Association, Korea Broadcasting Channel Promotion Association, Korea Broadcasting Association, Korea Animation Industry Association, and Korea Film Producers Guild, have urged the government to raise the tax credit rates on production costs to enable competition in the global market.

On the 21st, these five organizations issued a statement titled "Urgent Call to Raise Production Cost Tax Credit Rates to Match Competing Countries Amid Crisis in the Video Content Industry," requesting that the current tax credit rates of 3% for large corporations, 7% for mid-sized companies, and 10% for small and medium enterprises be increased to 10%, 15%, and 20%, respectively.

The five organizations pointed out, "Whether 20 years ago when K-content first began to gain global attention or today, the content industry remains dominated by small-scale companies with fewer than 10 employees and annual sales under 1 billion KRW, accounting for 90% of the sector. While production costs are soaring daily amid competition with global content providers such as Netflix, Apple TV+, and Disney+, the funding structure of legacy broadcast media is deteriorating, and the film industry faces a crisis with a 75% drop in audience numbers compared to 2019 due to COVID-19."

They added, "In this situation, the new government’s designation of the content industry as a future strategic industry to sustain Korea’s next 20 years and its promise of substantial support have become a ray of hope in deep darkness. However, the government's tax law amendment proposal announced last July regarding the ‘Video Content Production Cost Tax Credit’ maintained the existing credit rates of 3% for large corporations, 7% for mid-sized companies, and 10% for SMEs, merely extending the current system for three years, leaving the industry deeply skeptical and disappointed."

They continued, "Why should the content industry alone be excluded from the various tax benefits and high tax credit rates of over 30% granted to other future strategic industries such as the Big 3 industries? We cannot help but doubt whether the national contribution and the bold support promises for K-content, which were so highly praised, were nothing more than lip service. We urge the National Assembly, the last bastion of public opinion, to face the crisis in the video content industry and faithfully implement the promised support as a future strategic industry. We request that the tax credit rates for the ‘Video Content Production Cost Tax Credit’ system, currently under National Assembly review, be raised to 10% for large corporations, 15% for mid-sized companies, and 20% for SMEs as follows."

They demanded government support at levels close to competing countries, comprehensive support for the entire video content industry, and an increase in credit rates in line with the law’s intent.

They stated, "To enhance competitiveness against global content providers, activate production, and encourage production willingness, government support at least close to that of competing countries is necessary. The current domestic video content market has become a battlefield competing directly with global players rather than among domestic companies. Netflix, Disney+, and others invest massive production costs supported by approximately 25% production cost tax credits according to their national policies, aggressively targeting the Korean content market. Meanwhile, domestic content providers risk being left behind in production cost competition and reduced to subcontracting bases supplying IP to global media platforms. For the protection of the domestic video content industry, government support comparable to that provided to global content providers, rather than comparisons with other domestic industries, is urgently needed," they urged.

Furthermore, "The Big 3 industries such as bio-health, system semiconductors, and future cars operate tax credit systems of up to 50% on research and development (R&D) costs. The content industry is a high-growth sector with an average annual sales increase of 4.9% and export growth of 18.7% over the past five years. It is an industry creating youth jobs, with 78.3% of workers under 39 years old, and it has sufficient investment value by maximizing economic ripple effects and national brand value increases in related industries such as consumer goods and tourism. We remind the Yoon Suk-yeol administration that the content industry was included as a key sector to secure super-gap technologies outside the Big 3 industries in both the presidential election pledges and national agenda announcements, and we urge responsible fulfillment of these promises," they emphasized.

They also noted, "The ‘Video Content Production Cost Tax Credit’ was proposed by the Ministry of Strategy and Finance in 2016 as government legislation to support the service industry and the Korean Wave. The original credit rates were 7% for large and mid-sized companies and 10% for SMEs, but during National Assembly deliberations, they were lowered to 3%, 7%, and 10%, respectively. However, even the National Assembly that lowered the rates recognized the importance of the system and submitted proposals to raise the credit rates regardless of party lines. Considering the legislative intent remains valid, the increased influence and status of K-content, and the competitive environment, raising the credit rates is essential, and the government should actively accept the currently proposed amendments in the National Assembly," they requested.

The organizations concluded, "In the global market, once a country's cultural content loses the trust and leadership of the global audience, it is difficult to recover. If the crisis of K-content is neglected, it will follow the footsteps of Hong Kong cinema and Japanese J-pop, which once dominated the world but later regretted their past glories. To sustain the growth of K-content as a global cultural content trend leader and turn the current crisis into an opportunity, we strongly urge the government to immediately implement meticulous attention and bold support," they stressed.

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