Government: "We Must Not Miss the Golden Time for Semiconductor Support"... Requests National Assembly to Pass the 'K-Chips Act'

The government urged the National Assembly to promptly pass the amendment to the 'Restriction of Special Taxation Act,' stating that it can no longer delay expanding tax support for investments in national strategic technologies such as semiconductors.

On the 14th, the Ministry of Economy and Finance stated in reference materials titled 'The Need for Swift Amendment of the Restriction of Special Taxation Act' that "Investment tax credits mean the government bears a certain percentage of corporate investment amounts, and if the law is amended, the government's burden will increase by the raised credit rate, thereby providing additional support for corporate investments."

The amendment to the Restriction of Special Taxation Act, commonly called the 'K-Chips Act,' focuses on raising the tax credit rate for facility investments in national strategic technologies such as semiconductors from the current 8% (for large corporations) to 15%. Including a temporary credit of 10% for increased investments compared to last year, investment tax credits of up to 25% become possible.

The Ministry of Economy and Finance emphasizes the passage of the investment tax credit amendment because the growth rates of major export destination countries are expected to be in the 0% range or lower this year. If investments decline this year, there is concern over a triple crisis: expanded economic downturn and negative impacts on jobs → constraints on export competitiveness → damage to growth potential.

The Ministry reiterated that semiconductor tax support is not a policy for large corporations. The Ministry stated, "An approach from the perspective of national economic security is necessary, and framing this as a 'tax cut for large corporations' is inappropriate," adding, "Semiconductors operate under economies of scale, and without massive facility investments, entry is impossible, so large corporations inevitably lead the sector."

Furthermore, the expansion of large corporations' facility investments leads to increased sales and employment for small and medium-sized enterprises related to semiconductor materials, parts, and equipment, and also contributes to additional tax revenue increases, the Ministry emphasized. The Ministry added, "It is inappropriate to view this as a 'tax cut for large corporations' at a critical time when we must survive by competitively expanding government support against major countries," and "When large corporations increase investments, it also leads to the growth of partner companies."

Regarding concerns about tax revenue reduction, the Ministry said, "The total tax revenue reduction is 3.3 trillion won, of which about 2.3 trillion won from the temporary investment tax credit, a one-year temporary measure, will occur only in 2024," adding, "From 2025 onward, the short-term tax revenue reduction will decrease to about 1 trillion won annually."

The Ministry plans to make every effort to pass the amendment to the Restriction of Special Taxation Act during the March temporary session of the National Assembly. The opposition party has already taken a progressive stance on raising the tax credit rate for national strategic technologies such as semiconductors. The Ministry stated, "Investment tax credits are strategic investments to secure more tax revenue in the future through economic growth," and "Corporate investment and employment expansion lead to economic growth and job creation, and in the long term, a virtuous cycle of tax revenue expansion is expected as the tax base broadens."

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