Hostile tax rules may be scaring off foreigners

The domestic tax environment is less favorable to foreign companies than rival markets overseas, exerting a negative impact on their corporate activities, a poll showed yesterday.
The survey on 160 foreign companies by the Korea Chamber of Commerce and Industry (KCCI) showed 58.9 percent claiming that the burden of corporate tax is higher in Korea than in their home markets.

Only 11.4 percent said tax conditions were better here, while 29.7 percent said it was the same.

The KCCI’s report also said 48 percent of respondents viewed Seoul’s overall system of taxation to be inadequate to meet the needs of foreign companies, with 28.3 percent saying it is average.

The largest group representing businesses here said 76.6 percent of foreign companies advocated cuts, arguing that such steps can improve management conditions for companies.

On calls by local politicians to bump up taxes in order to fund welfare projects, foreign companies were overwhelmingly opposed to such steps.
Of the companies surveyed, 82.2 percent were against raising private income taxes and 78.5 percent opposed higher corporate taxes. Most balked at the idea of repealing tax breaks offered for business investments.

The KCCI reported that 69 percent of respondents said they would seriously consider pulling out of the country if the tax burden grows.

“Foreign companies seem to be more sensitive to sudden fluctuations in tax rates and related policies vis-a-vis Korean firms,” an official at the business organization said.

He said for the government to attract foreign investment to fuel job creation, more predictable tax policies should be maintained.

Yonhap