S. Korean gov¡¯t estimates losing $9.5 bn corporate tax revenue via tax benefits

South Korean government readying corporate and individual income tax next year to stimulate spending expects to lose 13 trillion won ($9.5 billion) from corporate tax revenue next year.

The government estimates 69.3 trillion won in tax exemptions for next year, according to the 2023 tax spending plan the Ministry of Economy and Finance submitted to the legislative for its budgetary outline review.

The biggest cut will be made in income tax amounting 40.4 trillion won to take up more than half of next year¡¯s total tax exemption. The key tax-deduction programs are for special deduction (5.8 trillion won) and employment subsidy (5.2 trillion won).

Income tax exemption has been increasing steadily, 34.6 trillion won in 2021 and 37.3 trillion won this year, to top 40 trillion won next year. However, its share within total tax cut will fall slightly to 58.3 percent next year from 58.6 percent this year. It accounted for 60.6 percent in 2021.

The next big tax break will be given in corporate income.

The government will cut corporate tax by 12.8 trillion won in 2023 through various programs, including tax deduction of 4.5 trillion won on R&D projects and 2.4 trillion won deduction on investment.

Bigger tax break has been provided for businesses over years, increasing from 8.9 trillion won in 2021 and 11.3 trillion won in 2022 to near 13 trillion won next year. It is to account for 18.4 percent of total tax break of next year, up from 15.6 percent in 2021 and 17.8 percent this year.

Value-added tax will be lowered by 11.3 trillion won next year, comprising 16.3 percent of total tax cut. The amount has grown from 10.2 trillion won in 2021 and 10.6 trillion won this year but the proportion is down from 17.8 percent in 2021 and 16.7 percent this year.

Other tax deductions planned for next year include 2.2 trillion won cut in inheritance/gift taxes and 1.04 trillion won cut in individual consumption tax.

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