Business leaders dissatisfied with gov’t proposal

Economy

Published: 22 Jul. 2014, 21:41

Business leaders dissatisfied with gov’t proposal

Finance Minister Choi Kyung-hwan, right, meets with the heads of the nation’s top business lobby groups including KCCI Chairman Park Yong-maan, seated to the right of Choi, and FKI Chairman Huh Chang-soo, sitting on the left of Choi, and Han Duck-soo, KITA chairman, on Park’s right. [NEWSIS]

Business leaders expressed discontent yesterday in their first meeting with new Finance Minister Choi Kyung-hwan over the government’s plan to tax companies’ corporate savings to force them to increase investment and spending.

“Some in the business community say that taxation on internal corporate savings can have bigger side effects [than the effects of the government’s policy],” Huh Chang-soo, chairman of the Federation of Korean Industries (FKI), said at the meeting, held at the headquarters of the Korea Chamber of Commerce and Industry (KCCI) in central Seoul. “Please take wider and more careful consideration.”

The chairmen of the nation’s five business lobbying groups, including the FKI, KCCI and the Korea International Trade Association (KITA), were present at the meeting.

“It doesn’t mean that the government will collect more taxes,” Choi responded. “We will design a plan that aims to make tax revenue related to corporate internal savings ‘zero.’”

During the closed-door session, Choi explained the misconceptions about the government’s plan.

“The goal of the plan is to help encourage companies’ profits to be spent more as investment and dividends,” Choi said. “The government will make sure the new plan doesn’t put tax burdens on businesses.”

According to Deputy Finance Minister Jeong Eun-bo, who accompanied the minister, Choi outlined the benefits for companies under the proposal, including tax incentives for those that increase dividends and higher wages for employees.

Although the central bank has been supplying liquidity into the market as the economy has slowly recovered, companies have been stashing up cash instead of spending, Choi said earlier. The central bank lowered its outlook from 4 percent to 3.8 percent. The Finance Ministry is expects a similar move: Choi mentioned that the economy could be 0.2 percentage points lower than its initial outlook of 3.9 percent.

The minister also once again asked companies to increase their spending to help boost the sagging economy at the meeting, though the business community did appear satisfied with the minister’s explanation.

“We delivered our concern sufficiently and [the minister] said he will reflect it sufficiently,” KCCI Chairman Park Yong-maan said yesterday.

“The chairmen agreed with the minister’s policies to boost the sluggish economy, but didn’t agree with the internal savings taxation plan,” an FKI official added.

The chairmen also expressed the expectation that Choi will lead the economic recovery in a swift manner.

“Because Choi knows the economy well and is highly supported by the government, lawmakers and the general public, we believe that he will be able to speed up government plans for economic recovery, which have been too stable and slow,” Park said.

BY SONG SU-HYUN [ssh@joongang.co.kr]