KCCI: "Temporary Investment Tax Credit Should Be Extended to 3 Years"

Seoul Jung-gu Korea Chamber of Commerce and Industry. / Photo by Jinhyung Kang aymsdream@

Amid growing concerns over the entrenchment of a low-growth structure due to sluggish exports and domestic demand stagnation, the business community has called for extending the temporary investment tax credit period to three years to promote corporate investment.

On the 17th, the Korea Chamber of Commerce and Industry (KCCI) announced that it submitted a 'Request for Extension of the Temporary Investment Tax Credit Period' to the government and the National Assembly, stating, "To overcome low-growth concerns and achieve an economic rebound, private investment must be promoted and used as momentum to overcome the low-growth hurdle."

The temporary investment tax credit is a system introduced last April to boost corporate investment, which was shrinking due to the economic downturn, by temporarily increasing the tax credit rate for corporate facility investments by 2 to 6 percentage points for one year.

The KCCI emphasized, "The policy period was too short to produce effective results," adding, "Considering that companies need at least one year to make new facility investment decisions, the time constraint was significant for it to act as an incentive to actually increase investment."

In fact, a recent survey conducted by the KCCI targeting 300 manufacturing companies showed that 81.3% of respondents said the temporary investment tax credit system did not help their investment decision-making. The main reasons cited for the lack of help were insufficient promotion of the system (63.5%) and the one-year temporary application (20.5%).

In the request, the KCCI also stressed that revitalizing facility investment is crucial to overcoming the economic downturn crisis and breaking the low-growth structural entrenchment. With domestic demand severely contracted, exports will become a key pillar of economic growth, and facility investment must support this, necessitating investment support.

The KCCI added that since facility investment has decreased for two consecutive years, it needs to increase by 9.2% annually until 2025 to return to a normal growth trajectory, making the extension of the temporary investment tax credit period a very important timing.

They also presented empirical analysis results showing that when the investment tax credit rate increases by 1 percentage point, corporate investment can increase by up to 8%.

This year, corporate financing conditions have rapidly deteriorated due to sharply rising corporate loan interest rates and surging interest burdens, causing investment delays compared to plans. As of October, the corporate loan interest rate was 5.29%, the highest in 10 years, while the outstanding corporate loan balance recorded approximately 1,876 trillion won, an increase of 106 trillion won compared to the previous year.

The KCCI also pointed out that major industries such as semiconductors are improving and reiterated the need for proactive facility investment support in preparation for economic recovery next year. Lee Su-won, head of the Corporate Policy Team at KCCI, said, "Facility investment is an important foundation not only for current economic growth but also for future growth," adding, "We hope the government and the National Assembly will promptly make a decision to extend the period so that the temporary investment tax credit can serve as a stepping stone for overcoming low growth and achieving an economic rebound."

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