What’s best for businessPresident Donald Trump has proposed lowering the corporate tax rate from 35 percent to 20 percent, the biggest cut since the Reagan administration in 1981. He has also proposed reducing the number of income tax brackets from seven to three, with the top rate slashed to 35 percent from 39.6 percent. Under the plan, corporate taxes in the United States would become cheaper than in Korea.
Trump promised to bring jobs to the United States by creating a more favorable business environment, and governments around the world have been doing similar, lowering taxes to lure companies and manufacturing facilities to their countries.
For the past six years, Japan has been lifting regulations, bringing the top corporate tax rate down to 30 percent and easing rules in the capital to allow idle runways and other land around Tokyo’s Haneda Airport to be turned into a corporate hub for aircraft and robotics. Canon has returned home to make digital cameras in Japan for the first time in a decade.
Businesses invest and hire when the environment is favorable. Governments around the world are competing to shift industries in tune with a technological evolution led by automation and digitalization. Japanese Prime Minister Shinzo Abe has vowed to hone individual productivity to lead innovation. Regulations are being eased in farming, telemedicine and casinos to allow new companies to flourish. The public and private sectors have joined to make the job market flexible by expanding work from home.
China’s recent Communist Party Congress focused on entrepreneurship. Beijing promised to pass laws that better protect the assets and management rights of entrepreneurs and help create a freer environment for business. The South China Morning Post called the platform a major shift to capitalism. China has also been ahead in new innovations like electric vehicles and drones.
Korea is a small open economy exposed to global competition. The United States, Japan and China are not only important markets but also competitors. We are helplessly watching them gallop further and further away.
The government has been experimenting with income-led growth, but companies are burdened by the higher labor costs and stricter labor rules. They have lately turned their attention to innovation. Korea needs a miracle prescription if it wants to catch up with the front-runners in innovation.
JoongAng Ilbo, Sept. 30, Page 30