Hard-hit areas can stall paying taxThe government is giving a grace period for tax payments to companies in regions slammed by the downturns in shipbuilding and automobile manufacturing.
On Tuesday, the cabinet decided on tax reprieves of up to two years for some small and medium-sized companies in regions designated as “areas in crisis,” according to the Ministry of Strategy and Finance. Qualifying companies would also be given a two-year grace period on property seizures if they fail to repay debts.
An official from the Finance Ministry explained that the measures, which will go into effect by the end of this month after approval from the president, are a follow-up to an initial proposal by the ministry in April to provide government-level support to local economies suffering from lots of layoffs.
“The government gave a grace period of up to one year before,” explained the official from the Finance Ministry. “But it deemed it necessary to expand that period for the designated regions to further relieve them of tax burdens.”
Companies will be eligible if their businesses suffered “grave losses” or are in “severe crisis,” according to a press release by the ministry.
Areas labeled as being in “crisis” situations back in April are Geoje, Tongyeong, Goseong County, Jinhae District in Changwon and Dong District in Ulsan, all of which have been hit by a protracted slump in the global shipbuilding industry, and Gunsan, home to a loss-making assembly line of GM Korea that officially closed at the end of May. Those regions suffered massive layoffs.
While the government continues to throw life preservers to regional economies on the verge of collapse, experts are calling for more permanent solutions.
“If we look at countries like the United States, the government often assumed an active role to keep companies from leaving areas that were hit by recessions, providing aid such as tax breaks,” explained Sung Tae-yoon, a professor of economics at Yonsei University.
“But if the support measures are only meant to be temporary, they will not be sufficient to keep companies from closing down or leaving the areas,” he continued, “and with the cost of labor steadily increasing [due to government policies such as a hike in the minimum wage], it’s necessary that the government come up with more comprehensive and lasting solutions.
“In reality, it’s becoming more expensive for companies to do business anywhere in Korea,” Sung added, “meaning demands for government aid such as tax break to offset growing labor costs are on the rise across the country.”
BY CHOI HYUNG-JO [email@example.com]