The South Korean government plans to cut corporate taxes to support economic growth, increase investment and create new jobs, the country’s Ministry of Economy and Finance said.
A bill will be introduced in Parliament to reduce the top corporate tax rate to 22% from 25%.
The ministry also proposes to simplify the existing four-tier system of tax rates for companies, which range from 10% to 25% depending on profits, to two rates of 20% and 22%.
The agency believes that the new tax code, which also includes provisions for tax holidays and deductions for small businesses and their employees, will lead to a decrease in tax revenue in South Korea by 3% or 13.1 trillion won ($9.98 billion) per year. . However, this should not undermine the country’s budget.
It is proposed to revise the tax legislation mainly to support economic growth in a period of rising inflation and economic slowdown, as well as to encourage businesses to increase investment and create new jobs.
These will be one of the key changes designed by South Korea’s new conservative government, led by President Yoon Seok-yeol, who took office in May. The country’s previous president, Moon Jae-in, who belonged to the Liberal Party, raised the top corporate tax rate to 25%.
For the changes to take effect, the government needs to get support in the country’s parliament, which is currently dominated by liberals.