International Law

Happy Taxpayers Day

Here’s something you probably didn’t know: Today is Taxpayers’ Day in Korea. I’m not sure what kind of celebrations are held to mark the occasion of Taxpayers’ Day, but it’s good to know the government is thinking of us.

Coincident with Taxpayers’ Day, the Maekyung Ilbo reports that Lee Myung-bak’s team is thinking about a tax-cutting agenda:

Strategic Planning and Finance Minister Kang Man-su stated on March 2 in his speech commemorating Taxpayers? Day, “More than anything else, bold taxation reformations will be initially promoted. Along with a graduate reduction of corporate tax rates, consolidated tax return policy will also be introduced.”

[MSPF Tax Policy Chief Huh Yong-seok] revealed, “International competition to cut taxes is extremely stressful. Close eye is kept on tax reduction plans of Asian competitors: China, Taiwan, Hong Kong and Singapore.” He added, “Taiwan?s corporate tax rate will be down by 15 percent by year 2010 and China, Hong Kong and Singapore are also following suit to lower their corporate tax rates. Korea?s corporate tax must meet that of Taiwan?s level.” The Taxation Policy Chief said, “Korea?s tax burden rate may be lower than the OECD average but is still high compared to its Asian neighbors.”

Corporate tax rates are relatively high: The first W100 million of net profit is taxed at 14.3% (basic tax rate 13% payable to the central government plus a surtax of 1.3% payable to the local government), but everything thereafter is taxed at 27.5% (25% + 2.5%). There is not much progressivity to the Korean corporate-tax regime, something the government might look to implement if there is pressure not to lower the basic tax rate.

In 2000, the corporate tax rate was 30.8%, so the current rate represents about a 10% cut from that. If Korea matches Taiwan’s tax reduction, we might in 2010 be seeing an effective corporate tax of just around 23%. Tax cuts work to stimulate economic growth. Dare LMB’s team go lower? The MK story hints at some objective of a 5% corporate-tax rate…

Full post as published by Korea Law Blog on March 03, 2008 (boomark / email).