Going against the tideThe U.S. Senate approved a bill on a sweeping tax code revision to execute President Donald Trump’s key campaign promise to slash tax rates. Under the bill, the maximum corporate tax rate would be come down to 20 percent from the current 35 percent.
A version that passed the House also cuts the top rate by 15 percentage points. Once the Senate and House coordinate separate versions of the tax bill, U.S. enterprises will enjoy their biggest tax cut in 31 years.
Japan also is mulling a temporary cut of up to 20 percent from the current 30 percent. It wants to buy time for Japanese enterprises to invest more aggressively in innovations for the evolution into a fourth industrial age. Under the so-called package on productivity revolution that Tokyo will unveil soon, the tax rate will drop to allow companies to become more globally competitive.
Korea is going the opposite direction of the global trend of governments competing to make an environment more favorable for companies. The government and ruling party have proposed to raise the maximum tax rate on companies earning 200 billion won ($184 million) or more to 25 percent from the current 22 percent. The opposition differs on the scope of the hike, but nevertheless is unopposed to raising the levy on large companies.
Once the tax bill passes the legislative, tax rates on large companies will go up for the first time in 28 years. The corporate tax rates of the countries that make up the Organization for Economic Cooperation and Development last year averaged 24.7 percent — down from 32.2 percent in 2000.
Governments around the world are trying to create good business environments because that is the only way to generate decent jobs.
Korea Inc. is beset with a bombardment of government demands — the hike in minimum wage, cuts in work hours, and conversion of contract workers to permanent status — that will sharply increase the burden of labor costs. Korean companies cannot afford to hire and operate at their best on the international stage. The government must not make the mistake of killing the goose before it lays the egg.
JoongAng Ilbo, Dec. 5, Page 34