Seoul mulls broadening minimum corporate tax subjects while cutting maximum rate

[Photo by Han Joo-hyung]

South Korea mulls broadening the application for minimum 10 percent corporate tax while proposing to lower the maximum levy rate from 25 percent to 22 percent under the new government out to build more business-friendly environment for investment and hiring.

According to sources from the economy and finance ministry, the Korean government is reviewing a plan to amend the four-tier corporate tax income bracket that would end up widening the corporate tax cut effect.

Under current corporate taxation, the bottom 10 percent tax rate is imposed on companies earning 200 million won ($156,000) or less, 20 percent on companies earning above 200 million won to 20 billion won, 22 percent on companies with income of above 20 billion won up to 300 billion won, and the top 25 percent on companies earning beyond the threshold.

Under the first economic policy direction released earlier this month, the new government proposes to lower the maximum corporate income tax rate to 22 percent from 25 percent that had been raised under the former government. With the cut, the top levy would be going back to the levels of 2009 under Lee Myung-bak administration.

The proposed move drew criticism of favoring super-big companies.

Based on the 2020 corporate income data, only about 80 companies or 0.01 percent of 838,000 companies subject to corporate income tax would benefit from the cut in maximum rate.

For balance, the government is considering to broaden the bottom levy category. It would remove the 300 billion won threshold on the top and expand the lower income category at the bottom to simplify the tax code to three-tier system.

The adjustments however could lessen tax revenue and worsen fiscal deficit.

The cut in maximum income tax is projected to shave tax revenue by 2 trillion won to 4 trillion won.

[¨Ï Maeil Business Newspaper & mk.co.kr, All rights reserved]