Service industry takes center stage

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Service industry takes center stage

The government will provide greater tax reductions and financial support for service businesses to get rid of what it called its own “discrimination” against the industry, the Ministry of Strategy and Finance said yesterday.

The service industry accounted for nearly 58 percent of GDP and over 68 percent of total employment in 2010, one year after the government said it was shifting its focus from the manufacturing sector to service businesses.

However, the government’s support for companies continues to focus on manufacturing businesses.

“During the process of economic development, the service industry has been discriminated against due to government policies on the taxation system, financial support, employment and infrastructure that focused on manufacturing businesses,” the ministry said in a press release.

“The government has worked to remove the distinction between its policies for manufacturing and service businesses, but such a distinction still exists.”

Currently, all manufacturing firms, regardless of their size or product, are subject to preferential tax rates, while only a handful of service businesses that have been labeled knowledge-based are subject to tax reductions.

A large gap also exists in the amount of money each industry receives in support.

In 2011, 53.8 percent of all manufacturing companies received some type of financial support from the government, while only 10.8 percent of service businesses enjoyed similar aid, according to the ministry.

The government has spent less than 1 percent, or 64 billion won (US$56.6 million) of 16 trillion won, earmarked for R&D this year.

To narrow the gap in government support for the service industry, the ministry said it will expand its R&D fund for the industry to over 70 billion won in 2013, while also broadening the scope of which kind of service businesses will be subject to the tax reductions.

Yonhap

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