Park Geun-hye opposes tax cuts for high incomes

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Park Geun-hye opposes tax cuts for high incomes


Park Geun-hye

Park Geun-hye, former chairwoman of the ruling Grand National Party, said during a plenary session at the National Assembly yesterday that Koreans who earn more than 88 million won a year ($77,704) should not receive tax cuts that are supposed to go into effect in 2013.

“I feel it is desirable to keep the current income tax rate for the highest income class as it is and to lower corporate tax rates for the highest standard of assessment as scheduled,” said Park.

The income tax revision that was passed by the National Assembly’s Strategy and Finance Committee last year reduces the tax rate for those earning more than 88 million a year from the current 35 percent to 33 percent starting Jan. 1, 2013. Corporate taxes are to be lowered from 22 percent to 20 percent for businesses with taxable profits of 200 million won and higher.

By expressing support for one tax cut but not both, Park was seemingly striking a compromise between conservatives, who want both cuts, and liberals who say the GNP only favor the wealthy.

The plans to cut income and corporate taxes were proposed as part of the Lee Myung-bak administration’s stimulus package last December, but were postponed until 2013. The tax revision has been one of the top issues debated in the National Assembly, along with President Lee’s four-rivers restoration project.

Park, seen as a strong candidate for the next presidential race, said the government’s fiscal health had weakened and income imbalances had increased since the global financial crisis.

“Keeping the income tax rates for those who make more than 88 million won a year the same can help the government’s financial health and also enable the government to shrink the gap between income classes,” said Park.

The lawmaker added that corporate taxes should be lowered as stated in the tax revision.

“Lowering corporate tax rates is important for growth and creating jobs,” Park said. “Jobs are most important to our economy and jobs can only be created when there is growth.

“Businesses have already set up their investment plans for the past two years since the tax law revision and if we change this now they will be forced to change their plans. Enforcing the corporate tax cut will keep consistency in the government’s policies, and we will also gain the upper hand in the competition to cut corporate taxes with other countries. I think this is what we need for bigger investments and more jobs.”

Park cited Taiwan, Singapore and Germany as examples of countries that had lowered corporate tax rates to encourage business.

In response to Park’s comments, Minister of Strategy and Finance Yoon Jeung-hyun said there were no changes in the government’s taxation plan.

By Christine Kim []
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