Lowering the corporate taxPark Yong-jin, a two-term lawmaker of the ruling Democratic Party (DP) running for president, campaigned to cut corporate and income taxes to help boost corporate hiring and investment. He claimed that the government’s reckless fiscal stimuli and outdated mindset of collecting more taxes for populist handouts has put the country on same the dismal path of Japan. Earlier last week, he admitted that the DP has tabooed a tax cut and pitched as if a tax increase was the only solution. But Park pledged to go separate ways by promising a tax cut to stimulate companies and jobs. In a speech in Jeju Island, Rep. Lee Kwang-jae, another presidential aspirant from the DP, also argued that Korea’s corporate tax rate of 21 percent to 25 percent should come down to attract global enterprises to Jeju.
The tax cut platform from the liberal front is a diverge from the ruling party’s policy direction. The two lawmakers’ courage to stand up against their party is laudable. Under the Moon Jae-in administration, corporate and income taxes have risen sharply. The frontrunners in the presidential race on the ruling front — Gyeonggi Gov. Lee Jae-myung and former Prime Ministers Lee Nak-yon and Chung Sye-kyun — all call for further tax increases.
The DP has adhered to fiscal stimuli through tax increases. Aggressive fiscal role was inevitable due to the Covid-19 pandemic. But even with national liabilities at 1,000 trillion won ($884 billion), the DP has argued for a universal relief handout through the extra budgeting of over 30 trillion won from the estimated surplus tax of 33.7 trillion won of this year instead of paying off some of the debt.
Like the two lawmakers said, there is no future in the economy without companies. The government is scaring off companies with heavy taxes and support militant unions, let alone creating a business-unfriendly environment. Korea’s corporate tax rate is at 27.5 percent at the top and 17 percent at the bottom. The level is higher than global minimum corporate tax rate of 15 percent proposed by the recent G7 summits in Britain. South Korea ranks at 24th in the Index of Economic Freedom, an annual measurement on the degree of economic freedom by conservative think tank Heritage Foundation. Among other Asian countries, Singapore is at No. 1, Taiwan at sixth and Malaysia at 22nd. Overseas direct investment by Korean companies reached all-time high of $61.9 billion last year. Foreign investment in Korea stood at a meager $23.3 billion.
The campaign race for next presidency is in the making. People’s choice in March next year is foreseeable. They will vote for someone who can rebuild the economy. The tax cut proposal from the DP members must stir a reasonable debate on the issue in the DP and government.