[Reporter’s Notebook] Ruling and Opposition Parties Must Join Forces to Expand 'Semiconductor Tax Credits'

Government Reverses Course in Just One Month
Special Taxation Act Faces Stalemate in Tax Subcommittee
Democratic Party Previously Proposed Higher Tax Credit Rates than Current Policy

[Asia Economy Reporter Hyunju Lee] "It must be really serious for us to bring up the drama 'The Youngest Son of a Chaebol Family.'

On the 14th, right after the National Assembly's Planning and Finance Committee's Tax Subcommittee ended, a ruling party lawmaker said this in a phone call with a reporter. It was said to be mentioned because opposition lawmakers were rarely persuaded during the discussion of the so-called 'Semiconductor Act (K-chips)' at the tax subcommittee that day. The drama deals with the success of a company that promotes the semiconductor industry as the 'future food source' as a major theme. The tax subcommittee is reviewing an amendment to the Restriction of Special Taxation Act to raise the tax credit rate for national strategic technology facility investments, including semiconductors, from the current 8% to 15%.

The opposition party is raising concerns over the Ministry of Economy and Finance submitting a bill to raise the tax credit rate to 15% again on the 19th of last month, less than a month after the law was amended under President Yoon Seok-yeol's directive. This is because the bill was passed last year at the end of the year through bipartisan agreement but was later reversed. The Democratic Party of Korea also proposed at that time a plan of 10% for large corporations, 15% for mid-sized companies, and 30% for small and medium enterprises, which were higher than the current tax credit rate (8%). The government, concerned about a decrease in tax revenue, insisted on 8%, which became the current credit rate.

While the opposition's resentment due to the discord between the Presidential Office and the Ministry of Economy and Finance is understandable, the semiconductor industry is a core export industry and an economic pillar of our country, enough to be featured as a drama theme. Countries around the world are engaged in a silent war to dominate the semiconductor sector, known as the 'rice of industry.' Taiwan, a competitor of our country, offers a 25% tax credit on semiconductor company research and development expenses, and the United States also has a 25% tax credit rate for semiconductor facility investments. China exempts corporate tax for 10 years. Financial support is even more generous. Subsidies amount to 1 trillion yuan (180 trillion won) in China, 52.7 billion dollars (69 trillion won) in the United States, and 43 billion euros (59 trillion won) in Europe. Our country spends only 100 billion won on infrastructure support this year.

Semiconductor exports have decreased for six consecutive months until January this year, and exports from the 1st to the 10th of this month sharply dropped by 40.7%. Samsung Electronics is facing Intel's constant attempts to overtake the world's number one position in memory semiconductors, and in the non-memory semiconductor sector, the technological gap with competitor Taiwan's TSMC is widening. The industry's claim that once we fall behind in the global semiconductor competition, recovery is difficult, should no longer be ignored. The government must actively persuade the opposition to gain their understanding. Only then can the amendment to the Restriction of Special Taxation Act be agreed upon as soon as possible.

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