Korean Businesses Urge Tax Reforms to Spur Investment and Economic Growth
South Korea’s leading business lobby group is calling for significant tax reforms to stimulate investment, boost job creation, and improve the nation’s economic vitality amid growing uncertainties.
The Korea Economic Association (KEA), formerly the Federation of Korean Industries (FKI), has submitted a thorough proposal to the Ministry of Economy and Finance, outlining 89 specific revisions across 10 laws. These proposals focus on incentivizing corporate actions that directly benefit the broader economy and society.
KEA is advocating for the removal of caps on tax deductions for increased facility investments, which directly impact job creation.The current system limits deductions to twice the amount of the current year’s deduction, regardless of how much a company increases its investment. KEA argues that this restriction discourages further investment.
KEA is urging the government to include large corporations in the temporary investment tax credit programme. While recent legislation extended increased tax credits to small and medium-sized enterprises (SMEs),large companies were excluded. KEA stresses that investments by these larger entities are crucial for job creation and expanded business for their SME partners.
“Large companies contribute to society through expanding business and promoting investment and creating jobs in small and medium-sized companies,” the KEA stated.
On dividends, KEA proposes including “dividends for minority shareholders” as a method for channeling income within the Investment and Shared Growth Promotion Tax system. This, KEA argues, would encourage companies to distribute profits to individual shareholders, boosting household income, and driving further investment.
Concerning donations, KEA is pushing for the limit on tax exemptions for companies donating stock to public-interest corporations to be raised. the current limit is 10% of the total number of shares issued by the company (5% for large business groups and public-interest corporations with special relationships). KEA wants to raise this limit to 20%, aligning with the level in the United States.
Regarding the proposals, Head of the KEA’s Economic and Industrial Department, emphasized that “tax reforms are needed to support the national economy by corporate capital in order to overcome the recent continued domestic demand slump and improve the frozen economic sentiment.”
Updated 2025/03/19
How does the Korea Economic Association (KEA) propose to incentivize increased facility investments by Korean companies?
korean Businesses Urge Tax Reforms to Spur Investment and Economic Growth
South Korea’s leading buisness lobby group is calling for significant tax reforms to stimulate investment, boost job creation, and improve the nation’s economic vitality amid growing uncertainties.
The Korea Economic Association (KEA), formerly the Federation of Korean Industries (FKI), has submitted a thorough proposal to the Ministry of Economy and Finance, outlining 89 specific revisions across 10 laws.These proposals focus on incentivizing corporate actions that directly benefit the broader economy and society.
KEA is advocating for the removal of caps on tax deductions for increased facility investments, which directly impact job creation.The current system limits deductions to twice the amount of the current year’s deduction, regardless of how much a company increases its investment. KEA argues that this restriction discourages further investment.
KEA is urging the government to include large corporations in the temporary investment tax credit program. While recent legislation extended increased tax credits to small and medium-sized enterprises (SMEs),large companies were excluded. KEA stresses that investments by these larger entities are crucial for job creation and expanded business for their SME partners.
“Large companies contribute to society through expanding business and promoting investment and creating jobs in small and medium-sized companies,” the KEA stated.
On dividends, KEA proposes including “dividends for minority shareholders” as a method for channeling income within the Investment and Shared Growth Promotion Tax system.This, KEA argues, would encourage companies to distribute profits to individual shareholders, boosting household income, and driving further investment.
Concerning donations, KEA is pushing for the limit on tax exemptions for companies donating stock to public-interest corporations to be raised. the current limit is 10% of the total number of shares issued by the company (5% for large business groups and public-interest corporations with special relationships). KEA wants to raise this limit to 20%, aligning with the level in the United States.
Regarding the proposals, Head of the KEA’s Economic and Industrial Department, emphasized that “tax reforms are needed to support the national economy by corporate capital in order to overcome the recent continued domestic demand slump and improve the frozen economic sentiment.”
updated 2025/03/19
Frequently Asked Questions (FAQ)
Q: Why is the Korea Economic Association (KEA) pushing for tax reforms?
A: The KEA, representing major Korean businesses, believes tax reforms are essential to stimulate investment, create jobs, and revitalize the South Korean economy, particularly amidst economic uncertainties and a domestic demand slump. They see these reforms as crucial for boosting economic sentiment.
Q: What specific tax changes does the KEA propose regarding facility investments?
A: The KEA wants to remove the existing cap on tax deductions for increased facility investments. Currently, deductions are capped, which discourages further investment. Removing the cap would allow companies to deduct more, incentivizing them to invest more extensively.
Q: Why does the KEA want to include large corporations in the investment tax credit program?
A: The KEA argues that investments by large corporations are vital for job creation and also boost business for Small and Medium Enterprises (SMEs) that are partners or suppliers to the larger companies. Including large corporations in the tax credit program would encourage investment and benefit the wider economy.
Q: How would the proposed changes to dividend taxation work?
A: The KEA suggests including “dividends for minority shareholders” within the Investment and Shared Growth Promotion Tax system. This aims to encourage companies to distribute profits to individual shareholders,which would increase household income and encourage further investment in the economy.
Q: What’s the KEA’s stance on corporate donations of stock?
A: The KEA wants to increase the limit on tax exemptions for companies donating stock to public-interest corporations. They propose raising the limit from the current 10% of total shares (5% for large business groups) to 20%, aligning with the US system.This would encourage more corporate philanthropy.
Q: What is the potential impact of these tax reforms?
A: The reforms,if implemented,could led to increased investment from businesses in South korea,more job creation,higher household incomes,and an overall boost to the country’s economic growth.they aim to address the current economic slump by freeing up corporate capital.
Want to learn more about the impact of tax reforms? Stay informed about the KEA’s efforts to shape South Korea’s economic future.
