Beer event leaves business leaders parched“Corporations should perform well so that the national economy can do better,” said President Moon Jae-in when he met heads of major businesses at a banquet at the Blue House last Thursday.
He also complimented those businessmen present, but the cheery mood was darkened by the shadow of his campaign pledge to reform the chaebol.
The administration’s top agenda is job creation and it promises to provide tax exemption and budget support to those companies that provide more jobs.
But having to raise the minimum wage, under government order, means more spending on labor, which may discourage the hiring of more workers.
Moon asked large companies to help their smaller business partners and suppliers, which some see as an attempt to make up for losses that will result from the increase of the minimum wage.
Converting non-regular workers to regular workers also costs a lot, which in turn leads to fewer new jobs.
The administration is also preparing to raise the corporate tax, which the president cited as a last priority during his candidacy.
Corporate tax as a portion of national tax is huge. Korea collected 52.1 trillion won ($46.3 billion) in corporate tax last year, which accounted for 21.5 percent of the entire national tax pie.
Experts are concerned how the government can manage the balance between raising taxes and the fallout from corporations’ relocation to overseas sites to escape the tax burden.
“If the government raises the corporate tax rate, the tax income may not be as big as expected and will result in foreign investors exiting this country,” said Cho Kyung-yeop, head of research at the Korea Economic Research Institute, a private think tank.
Cho added, “That’s why major economies are scrambling to slash their corporate tax rates.”
U.S. President Donald Trump, for example, is seeking to cut the federal corporate tax from 35 to 15 percent.
Conglomerates and other large corporations are trying to follow the government’s guidelines.
Hyundai Motor and its sister company, Kia Motors, coughed up 50 billion won to set up a so-called mutual-growth fund meant to help out their partner companies. SK also promised to build a 160 billion won fund to support smaller business partners.
Doosan and Doosan Infracore likewise pledged to sign 450 contract workers as regular workers and CJ decided to directly hire cooks and broadcasting employees who were contract-based.
These pledges may partly be an attempt to win favor with the new administration, fearing possible backlash such as the one faced by the Korea Employers Federation, a business lobbying group, which Moon publicly criticized in May after it opposed an increase to the minimum wage.
All this has led some to question the sincerity of Moon’s beer garden event.
“If it really wants businesses to prosper,” said Yoon Chang-hyun, professor of business administration at the University of Seoul, “the government should put itself in the shoes of corporations and listen carefully to what they really want and accept their requests.”
BY KIM JOON-HYUN [email@example.com]