Semiconductor Act Discussion Begins in National Assembly Today... February Passage Faces Difficulties

Corporate Tax Support Plan Expanded from 8% to 15%
Opposition: "Reversal Just One Month After Bipartisan Agreement"
Onple Act and Virtual Asset Act Also to Be Discussed by Month-End

[Asia Economy Reporters Hyunju Lee and Juni Park] On the 14th, the National Assembly's Planning and Finance Committee tabled the government's additional tax support plan for semiconductor facility investments by large corporations (Restriction of Special Taxation Act) at its plenary session. The committee plans to hold consecutive tax subcommittee meetings in the afternoon to actively discuss the amendment to the Special Taxation Act.

The government submitted last month an amendment to the Special Taxation Act (Semiconductor Act) to increase the tax credit rate for large corporations' semiconductor facility investments, which was raised at the end of last year through the National Assembly plenary session, from the current 8% by an additional 7 percentage points to 15%, aiming to secure global market competitiveness of domestic semiconductors. The amendment also includes facility investments in national advanced strategic technologies such as batteries and vaccines, and for small and medium enterprises, the rate will be raised from 16% to 25%. The resulting tax revenue loss is expected to be 3.65 trillion KRW.

The ruling party expects no significant disagreements in the practical review of the Semiconductor Act and anticipates smooth progress during the February extraordinary session. However, the opposition parties criticize it as a 'large corporation privilege' and oppose it, arguing that it overturns an amendment agreed upon by both ruling and opposition parties just one month after the law's enforcement. A Planning and Finance Committee official from the Democratic Party said, "Although the schedule has been set, there are differences in positions regarding the bill's submission," adding, "We need to conduct a final review."

Deputy Prime Minister for Economy Choo Kyung-ho attended the full meeting of the Planning and Finance Committee held at the National Assembly on the 1st and is seen talking with First Vice Minister Bang Gi-seon before the meeting started. Photo by Yoon Dong-joo doso7@

The government and ruling party are expected to argue that, while signaling the severity of the economic crisis, the national advanced strategic technologies were designated during the Moon Jae-in administration and that this is not a conglomerate privilege but a necessary condition to drive Korea's industrial growth. Concerned about this year's economic downturn, the government has also submitted an amendment to temporarily raise the temporary investment tax credit rate (3~4%) uniformly to 10% for increased investments regardless of industry or purpose, in addition to the upper limit on the tax credit rate.

Even if the Special Taxation Act is placed on the tax subcommittee agenda, it may be blocked by the opposition majority, making the final passage uncertain. The amendment to the Special Taxation Act, passed by bipartisan agreement at the end of last year, is now being overturned due to issues raised by the Presidential Office, causing significant dissatisfaction within the Democratic Party. A Planning and Finance Committee official from the People Power Party said, "We need to persuade the Democratic Party well, but since they hold the majority of seats, it is not an easy situation."

The Online Platform Fairness Act (Online Platform Act) and the Digital Asset Basic Act (Virtual Asset Act), which are key bills being promoted by the National Assembly's Political Affairs Committee, are also unlikely to be passed in the February session.

The Political Affairs Committee agreed between ruling and opposition parties to hold a public hearing for the Online Platform Act legislation at its plenary session on the 9th of next month. The Online Platform Act has been treated as a major bill since the 21st National Assembly but has not progressed to detailed legislative discussions. However, after the Kakao outage incident in October last year, the Democratic Party expressed its intention to legislate platform regulations. Floor leader Hong-geun Park also emphasized the enactment of the Online Platform Act in his speech to the National Assembly negotiation group representatives the day before.

However, with the public hearing scheduled on the last day of the February session, the bill review has been delayed again. The Virtual Asset Act, which was a campaign pledge of President Yoon Suk-yeol, will begin discussions at the first bill review subcommittee on the 27th. Kim Jong-min, the opposition party secretary of the Political Affairs Committee from the Democratic Party, is pushing to hold a public hearing for the Virtual Asset Act discussion by the end of February, so it is expected to take time before legislation.

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