Heftier tax bills for conglomerates, the rich
SEOUL: South Korea imposed stiff tax increases yesterday, targeting leading conglomerates, high-income individuals and investors with large holdings of South Korean shares as President Moon Jae-in seeks to tackle income inequality and fund increased welfare benefits.
The corporate tax changes will hit 129 companies in South Korea and are expected to increase government revenue from corporate taxes by 5% or 2.6 trillion South Korean won (RM9.88 billion) from the 2018 tax year, the finance ministry said.
The top marginal corporate income tax rate will be raised to 25% from the current 22% for corporations with more than 200 billion won of taxable income a year, the finance ministry said in its annual statement on revisions to the tax code.
The proposed changes in the tax code are subject to parliamentary approval, posing a challenge for the government in passing the bill as Moon’s ruling Democratic Party only holds 40% of the 299 seats in the National Assembly.
The hike would put South Korea’s top corporate income tax rate on par with the average of the world’s 20 major economies, at 25.7%.
To address growing income inequality, “those who are better off, and conglomerates could contribute more to achieve social integration”, Finance Minister Kim Dong-yeon said at an embargoed briefing.
“Spent well, it could boost income for the socially marginalised and increase investment on manpower, and help create a virtuous cycle in the economy,” Kim said.
The government wants to raise more revenue to cover rising social welfare costs as a rapidly ageing population creates long-term problems for South Korea’s economy.
South Korea is set to become a superaged society by 2026, and has the fastestrising average age among the Organisation for Economic Cooperation and Development countries.
A super-aged society refers to nations where people of 65 years or older make up at least 20% of population, according to the United Nations. – Reuters