Top income tax rate to be applied to 90,000 moreThe National Assembly’s Strategy and Finance Committee yesterday reached a tentative agreement to widen the income range for those who will be charged the top income tax rate of 38 percent.
The corporate tax rate for the biggest companies may also rise one percentage point from 16 percent to 17 percent.
An estimated 90,000 individuals will be paying greater income tax, according to the government, which will result in 320 billion won ($303.3 million) more in tax revenue.
The current floor for the top income tax rate is 300 million won in yearly income. That will be lowered to 150 million won to extract more tax from “the haves” of Korean society.
Several tax-related bills were agreed upon by a subcommittee and were to be put to a vote yesterday by the Assembly as a whole. But the results were not available as of press time.
The last plenary session of the Assembly for the year was scheduled for 2 p.m. yesterday, but the ruling and opposition parties delayed it throughout the day as they failed to narrow their differences on a plan to reform the National Intelligence Service.
The bills the lawmakers tentatively consented to include raising the minimum tax rate applied to corporations with earnings of 100 billion won or more from the present 16 percent to 17 percent.
The business community protested the plan.
“Taking into account the level that was raised early this year, it is as much as a 3 percentage point rise in a single year,” said Im Sang-hyug, head of the public relations division at the Federation of Korean Industries.
The government raised the minimum tax required of large companies last December. Under the measure, put in place at the beginning of this year, the tax rate for corporations earning 100 billion won annually or more was raised from 14 percent to 16 percent. For smaller companies, whose pretax income was between 10 billion won and 100 billion won, the tax was raised 1 percentage point to 12 percent in January.
“The overall economic condition is changing quickly, but that does not mean that we can overlook stability and predictability in taxation,” Im said.
Im also said an increased tax burden could throw cold water on a budding economic recovery. He said it could lower Korea’s long-term growth potential by discouraging companies from investing in research and development.
The political parties are known to be considering making R&D investments ineligible for taxation exemption.
“It is reverse discrimination for companies doing R&D,” Im said.
Business circles also said higher taxes could impede the government’s efforts to lure foreign direct investment in Korea.
“It is not targeting foreign companies directly, but it signals a direction in which the Korean government may be going,” said an official of the Korea Chamber of Commerce and Industry.
BY SEO JI-EUN, MOON GWANG-LIP [firstname.lastname@example.org]