Tax Law Battle Begins for Next Year... Key Issues Include Corporate and Education Tax Hikes

The tax law battle for next year has begun. The focus of this regular session of the National Assembly is on the proposed increases in corporate and education taxes, as well as the introduction of separate taxation for dividend income. The National Assembly Budget Office has projected that, due to factors such as the recovery of domestic demand, next year’s tax revenue conditions will be better than initially expected.

On November 10, the National Assembly Budget Office hosted the “2025 Tax Law Amendment Bill Forum” at the National Assembly. The office predicted that, as the pace of domestic demand recovery is faster than the government expected, actual revenue will reach 396.1 trillion won, which is 5.9 trillion won higher than the government’s forecast. It also projected that more income tax and corporate tax will be collected than the government estimated. Sang Ji-won, Director of the Tax Policy Analysis Division at the National Assembly Budget Office, explained that, due to the government’s tax bill, the personal tax burden is expected to decrease by 435.1 billion won, while the corporate tax burden will increase by 6.2075 trillion won.

Geumcheol Park, Director General of the Tax Policy Bureau at the Ministry of Economy and Finance (far left), is presenting at the 2025 Tax Law Revision Bill Forum held at the National Assembly on the 10th. 2025.11.10 Photo by Hyunmin Kim

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Opinions were divided over the proposed increase in corporate tax rates by 1 percentage point for each taxable income bracket, and the plan to raise the education tax rate for financial and insurance businesses from 0.5% to 1% on earnings exceeding 1 trillion won. Assemblyman Jung Taeho, secretary of the Planning and Finance Committee from the Democratic Party of Korea, stated, “I support returning the corporate tax rate to the level before 2022,” adding, “Despite previous tax cuts, they did not lead to increased investment or job creation.” Professor Jung Se-eun of Chungnam National University gave a positive assessment of the direction toward tax increases, but noted, “This is merely a partial restoration of previous tax cuts.” Chun Haram, floor leader of the Reform Party and a panelist at the forum, said, “Raising the corporate tax is a tax increase, and shifting away from the previous administration’s tax cut policy is problematic in terms of policy consistency.” Assemblyman Park Sooyoung, secretary of the Planning and Finance Committee from the People Power Party, pointed out, “The top 1% of companies are responsible for 81.8% of all corporate taxes, meaning the tax burden is excessively concentrated on a particular group.” Park also highlighted the high proportion of “tax-exempt” individuals who do not pay income tax, in addition to corporate tax issues.

Regarding the education tax hike, both Assemblyman Jung and Assemblyman Cha Kyugeun of the Innovation Party for the Nation expressed support. In contrast, Professor Kim Woochul of the University of Seoul warned, “There is a high risk that the increased tax burden will ultimately be passed on to ordinary people and small and medium-sized enterprises through higher loan interest rates or fees.”

There were many concerns about the introduction of a special provision for separate taxation of dividend income for individual shareholders of high-dividend companies. Assemblyman Cha pointed out, “The low dividend payout ratio of Korean companies is fundamentally due to the ‘ownership-control gap’ among controlling families, rather than the dividend income tax rate,” adding, “There is a risk that this could end up supporting only existing high-dividend companies.” Professor Jung Se-eun stated, “Many studies have concluded that the impact of easing dividend income taxation is minimal.” Floor leader Chun Haram said, “The decision between dividends (for mature companies) and investment (for growth companies) should be made by management and shareholders, not the government. Pressuring companies to pay dividends is highly inappropriate.”

There was unanimous agreement among politicians and academics on the need to reduce tax reductions. Assemblyman Jung stated, “Tax expenditures have a lower impact on GDP growth than fiscal expenditures, and the benefits are regressive, concentrating on high-income earners.” The National Assembly Budget Office also emphasized, “As tax expenditures are expected to exceed 80 trillion won for the first time ever, it is necessary to develop efficient management measures.”

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