[EDITORIALS]Corporate tax cut is neededThe government ignored the demands of the business community by setting aside a revision of the corporate tax system as a medium-term task. Considering the economic conditions Korea is facing domestically and offshore, we worry that the government fails to grasp the present state of our economy.
The investment environment in Korea is far more disadvantageous than that of its competitors: high wages, militant labor unions, high living costs, strict business regulations and pro-labor government policies. Korea’s corporate tax also is higher than that of its competitors ― Hong Kong, Taiwan and Singapore. This is becoming a major reason for corporations to leave Korea, creating a vacuum in the manufacturing sector.
Early this year, the newly appointed deputy prime minister and minister of finance and economy said emphatically that the government would cut the corporate tax. He might have judged that the tax cut is important for boosting investment and reviving the economy. But he had to withdrew his remarks because the Blue House rejected the idea. Now, it is even missing on the nation’s short-term economic agenda. The government reacted negatively to the opposition Grand National Party’s demand to lower the tax by 1 to 2 percentage points, on the ground that revenue has declined.
Investment will not grow rapidly just because the corporate tax is lowered. But it will have the effect of proclaiming that the government is keenly interested in reviving investment and boosting the economy. It also will help corporations’ international competitiveness. The lost revenue can be recovered by adjusting the standard of assessment, and revenue will rise when the economy revives.
Despite various pump-priming measures, investment sentiment is not recovering. Even if the U.S. economy improves, it is hard to expect investment to revive if the investment climate is not drastically changed. We must find fundamental solutions, and lowering the corporate tax is one of them. If the Finance and Economy Ministry postpones a corporate tax cut in order to be obedient to the president, it amounts to a neglect of duty.