Corporate Tax Cut Draws Mixed Reactions: Business Community Says "Regrettable but Welcome," Civic Groups Call It a "Regressive Decision"

FKI "Disappointed that the Corporate Tax Rate Cut Is Not Sufficient"

People Power Party Floor Leader Joo Ho-young and Democratic Party Floor Leader Park Hong-geun pose holding the agreement document at a press conference announcing the joint agreement on next year's budget and tax law held at the National Assembly in Yeouido, Seoul, on the afternoon of the 22nd. From the left, Democratic Party Policy Committee Chairman Kim Seong-hwan, Floor Leader Park Hong-geun, People Power Party Floor Leader Joo Ho-young, Deputy Prime Minister for Economy Choo Kyung-ho, People Power Party Policy Committee Chairman Seong Il-jong.

[Asia Economy Reporter Choi Dae-yeol] The political circle's decision to lower corporate tax rates has been welcomed by the business community, albeit with some disappointment.

The Federation of Korean Industries issued a statement on the 22nd after the ruling and opposition parties agreed on the corporate tax reform plan, saying, "In a situation where companies are facing severe management difficulties due to the extreme economic downturn, high interest rates, and high inflation, we hope this corporate tax reform will serve as a small catalyst to help companies overcome the current management crisis."

However, they added, "The reduction in the corporate tax rate this time is not as substantial as initially expected, so it seems there will be limitations in enhancing the global competitiveness of domestic companies and attracting foreign capital to Korea, which is regrettable." They also expressed hope for further improvements in the corporate taxation system in line with international standards.

The Korea Employers Federation also said, "While somewhat disappointing compared to expectations, we welcome it." The federation stated, "This decision is expected to help improve the investment sentiment of our companies facing difficult economic conditions," but also noted, "There are still limitations in enhancing the competitiveness of our companies, which bear higher tax burdens than competing countries under more challenging business environments, with this reform plan."

The ruling and opposition parties and the government proposed a tax reform plan that lowers corporate tax rates by 1 percentage point for each taxable income bracket and expands the scope and deduction limits for mid-sized companies eligible for the family business inheritance deduction.

Civil society organizations criticized the agreement as a tax cut for the wealthy that was not properly examined. The People's Solidarity for Participatory Democracy stated in a press release that "the ruling and opposition parties competed in a last-minute tax cut race for the ultra-rich, passing the budget without proper review and through closed-door agreements," emphasizing that "the budget, which should have been allocated to improve the impoverished lives of the people, was finalized at the level of the Yoon Seok-yeol administration's budget, which neglected public welfare as a victim of political disputes."

They continued, "The government and the National Assembly, which strongly pushed for tax cuts benefiting only conglomerates and the wealthy while neglecting their duty to stabilize the lives of the people, cannot escape responsibility," criticizing the policy decisions as 'regressive.'

The organization pointed out, "There is no convincing basis for lowering corporate taxes," noting, "Even during the Lee Myung-bak administration, policies to reduce corporate tax rates were pursued, but instead of a trickle-down effect, tax revenues only decreased." They added, "The discussion process and outcome of this tax law amendment are very disappointing," arguing that "due to the National Assembly's anachronistic and regressive decision, resolving the serious polarization caused by asset and income inequality in our society has become even more distant."

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