Gov’t appeals for tax reform support from the Assembly

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Gov’t appeals for tax reform support from the Assembly

The government appealed to the National Assembly on Thursday to pass a set of tax reforms for next year that it says will prop up corporate restructuring, support new industries and improve conditions for middle- and lower-income households.

“We will reform the tax system to secure future growth engines by increasing our support for research and development as well as companies’ investments on their facilities [such as manufacturing plants] in 11 new industries as well as making it employment friendly,” Finance Minister Yoo Il-ho said in a meeting with lawmakers of the Saenuri Party in Yeouido, western Seoul.

The government plans to unveil its tax reform plan next week. The meeting with the Saenuri Party took place in hopes of gaining support for the plan, which the legislature needs to pass in order for it to take effect.

“We have focused [our tax reform for next year] on backing up corporate restructuring,” Yoo said, “so that it can be done smoothly while stabilizing the lives of middle- and lower-income households, small and midsize companies, small private entrepreneurs, farmers and fisherman by reducing the tax burden.”

The government’s plan comes at a time when Korea’s economic growth is expected to weaken on the back of a retreating global economy.

The International Monetary Fund earlier this week changed its growth outlook for both this year and next year based on the impact of Britain’s exit from the European Union. The organization lowered its forecast from 3.2 percent to 3.1 percent for this year and from 3.5 percent to 3.4 percent for next year.

“Although our economy is improving, mostly from the domestic economy and a slight recovery in exports, the [contribution from] the private sector is weak, and the uncertainties caused by both external and internal factors such as Brexit continues to expand,” Yoo said in the meeting.

The government’s goal is to create more jobs by supporting new industries and businesses while propping up the traditional manufacturing industries that are undergoing restructuring.

This includes the possibility of providing a maximum tax credit of 30 percent to any company that invests in 11 future growth industries including smart cars, biopharmaceuticals, robots and software.

Another area of reform that the government is reportedly looking into is changing the tax system to encourage start-ups and leading companies to allocate profits to investment and employees’ salaries rather than to dividend handouts.

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