Ruling and Opposition Parties Open Tax Battle...Clash Inevitable Over Dividend, Corporate, and Education Taxes

Tax Subcommittee of the National Assembly’s Planning and Finance Committee Begins
Tense Atmosphere Over Tax Law Revisions Aimed at Increasing Revenue

The National Assembly Strategy and Finance Committee's Tax Subcommittee, which will review various tax bills including the separate taxation of dividend income, corporate tax, and education tax, will begin its activities on November 12. As this is the first time in eight years since 2017 that a tax law revision aimed at increasing tax revenue is being pursued, heated debates between the ruling and opposition parties are expected.

On this day, the Strategy and Finance Committee will receive reports on the 2026 budget plans of economic ministries, including the Ministry of Economy and Finance, at a plenary session at 10 a.m., and then convene the Tax Subcommittee at 3 p.m. to discuss key tax issues. With the KOSPI entering the 4000 era, the separate taxation of dividend income is drawing the most attention. There is a consensus forming around lowering the top tax rate from the government-proposed 35% to 25%. Regarding concerns from some opposition lawmakers about a potential tax revenue shortfall, Deputy Prime Minister and Minister of Economy and Finance Koo Yooncheol explained that, considering the increase in tax revenue from the revitalization of dividends, the overall decrease in tax revenue would be less than 200 billion won.

According to an analysis by the National Assembly Budget Office, only 14.5% of manufacturing companies qualify as high-dividend firms subject to separate taxation of dividend income-either with a dividend payout ratio of 40% or higher, or a payout ratio of at least 25% with a dividend growth rate over the past three years averaging 5% or more. However, Park Sooyoung, the People Power Party's secretary of the Strategy and Finance Committee, and others are proposing to eliminate or ease the conditions for applying separate taxation to dividend income, which could prolong discussions on the details.

Intense debate is also expected over the proposed increase in the corporate tax rate. The Democratic Party argues that the corporate tax rates, which were uniformly reduced by 1 percentage point in each bracket under the previous administration, should be restored to secure fiscal resources. One Democratic Party lawmaker stated, "It is desirable to normalize tax revenue and for the state to invest where necessary." In contrast, the People Power Party maintains that raising the corporate tax rate would increase the burden on businesses and that fiscal soundness can be ensured by reducing government spending. At a recent tax law amendment forum held on November 10, Park pointed out, "Currently, the top 0.01% of companies-about 100 firms-pay 33% of all corporate taxes. Raising the tax rate would only add to the burden on well-performing companies."

Contentious debate is also expected over the education tax law. The tax law amendment includes a provision to double the education tax rate imposed on financial and insurance businesses with annual revenue of 1 trillion won or more, from the current 0.5% to 1.0%. The ruling party welcomes this, arguing that the financial and insurance sector, which has profited from high interest rates, should invest in national education. The opposition, however, maintains its opposition, expressing concerns that the cost could be passed on to the public.

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