“We will completely normalize the economy to be private-centered, market-centered, and commoner-centered.”
On the 17th, President Yoon Seok-yeol emphasized economic policy at a press conference on the 100th day of his inauguration. The plan is to abolish the income-led growth of the Moon Jae-in government and find future growth opportunities by operating the economy in a market-friendly manner. To this end, the Yoon administration has foretold extensive regulatory reform and tax reform. There are no significant differences between the ruling and opposition parties on regulatory reform. The problem is tax reform. For example, the government, the ruling party, and the opposition parties are in sharp conflict over a cut in the top corporate tax rate. The government is of the view that corporate investment must be reduced in Korea, which is higher than the average of the Organization for Economic Cooperation and Development (OECD), in order to boost corporate investment and secure economic growth engines. However, the opposition party is arguing that the corporate tax cut cannot be an incentive to promote corporate investment in a situation where the economic outlook is uncertain, such as the ‘three highs’ (high inflation, high interest rate, high exchange rate), and only reduces financial capacity by causing a decrease in tax revenue.
According to the National Assembly on the 20th, the Planning and Finance Committee held on the 1st was a sharp clash between the government trying to lower the top corporate tax rate and the opposition party trying to block it. The two sides clashed with each other over the effects of corporate investment, the tax cut controversy for the rich, and the impact of a decrease in tax revenue.
◆Government, “Corporate tax cut increases corporate investment ↑, long-term tax revenue increases”
The government emphasized that the lowering of the top corporate tax rate is sure to have the effect of inducing corporate investment. When asked, ‘Will lowering corporate taxes increase investment and jobs?’, Deputy Prime Minister and Minister of Finance Choo Kyung-ho said, “I think it will increase. It is also stated in the report,” he said. Deputy Prime Minister Chu said, “Aside from academic research, countries around the world have lowered corporate taxes. why did you get off Because it helps businesses vitality and economy,” he added. He said, “Except for the Moon Jae-in administration, all previous governments have lowered corporate taxes. Taxes and corporate taxes are still very important incentives for companies. It is difficult for me to deny this.”
Deputy Prime Minister Chu also pointed out that the corporate tax might not have an effect in the context of a complex crisis, saying, “I’d rather think the other way around. In fact, at a time when concerns about the economic recession are growing little by little, such a device is needed preemptively to enhance corporate vitality or revitalize corporate investment.”
In addition, Deputy Prime Minister Choo denied the view that a cut in the top corporate tax rate would be a tax cut for the rich. He said, “In a company, the tax is not going to a specific person, but the tax that goes to the shareholders, goes to the workers, goes to the subcontractors, and goes to the consumers is the corporate tax. has 5 million shareholders. They are all owners of the company. “The benefits of that corporate tax come to shareholders, then to the company’s investments, workers, suppliers and consumers.” Deputy Prime Minister Choo added, “The reduction rate of the burden on large corporations is about 10%, but this tax reform will reduce the tax burden on small businesses by about 13%.”
The government also explained that tax revenue will decrease immediately due to the cut in the top corporate tax rate, but if economic growth is achieved through the corporate tax cut, larger tax revenue will be secured. Deputy Prime Minister Chu said, “This (the corporate tax cut) increases our growth potential, and this expands the tax base. For this purpose, we decided to lower the corporate tax this time.”
◆“The effect of the money going into the national treasury will be shifted to the corporate reserve.”
Opposition parties, on the other hand, pointed out that the so-called ‘falling water effect’ expected by the government through the corporate tax cut has not been proven, and furthermore, in the current economic crisis, it will be an inappropriate policy that only increases the company’s internal reserves rather than promotes investment. The trickle-down effect is the theory that when large corporations grow, the growth will also lead to low-income economies such as SMEs.
Yang Kyung-sook, a lawmaker from the Democratic Party of Korea, said, “There are about 103 companies that benefit from the reduction of the top corporate tax rate from 25% to 22%. The corporate tax cut benefits will go to conglomerates such as Samsung Electronics, which are enjoying the best boom ever, and to the four major financial holding companies, who have earned over 19 trillion won in interest income in the first half of this year alone due to excessive loan-to-deposit margins.” Rep. Yang pointed out that although the corporate tax was cut during the Lee Myung-bak administration, there was no effect of expanding investment in large corporations, such as the amount of internal reserves of the 20 largest conglomerates increased from 322 trillion won in 2009 to 589 trillion won in 2013.
Democratic Party lawmaker Jeong Tae-ho also said, “I was at the Blue House during President Roh Moo-hyun, and then I did the evaluation two years after the corporate tax cut. At that time, there was no special effect on investment activation, employment, or economic revitalization. “The corporate tax cut policy leads to investment when there is an expectation that the economy will be good, but it does not lead to investment because of the prospect that the economy will be difficult either under the Lee Myung-bak administration or during the Trump administration,” said Rep. Chung.
Democratic Party lawmaker Hong Seong-guk also said, “It is said that corporate tax cuts are 6 to 7 trillion won a year, but Samsung Electronics made an operating profit of 14 trillion won in the second quarter, earning 54 trillion won a year. And he said, “I’m paying 13 trillion won in taxes a year.” He said, “With this amount, tax cuts increase investment. “Korea has the most balanced manufacturing industry portfolio in the world,” he said. And there is an oversupply in some areas.” “Therefore, global investment is now all about what kind of skilled manpower and related technologies do you have. It will only have an effect,” he said.
Sejong = Reporter Lee Hee-kyung [email protected]
[ⓒ 세계일보 & Segye.com, 무단전재 및 재배포 금지]
Source: 경제 by www.segye.com.
*The article has been translated based on the content of 경제 by www.segye.com. If there is any problem regarding the content, copyright, please leave a report below the article. We will try to process as quickly as possible to protect the rights of the author. Thank you very much!
*We just want readers to access information more quickly and easily with other multilingual content, instead of information only available in a certain language.
*We always respect the copyright of the content of the author and always include the original link of the source article.If the author disagrees, just leave the report below the article, the article will be edited or deleted at the request of the author. Thanks very much! Best regards!