Corporate income tax rates in Korea are still too high, despite plans for a 5% reduction, according to Strategy and Finance Minister, Kang Man-soo.
The minister spoke out in front of lawmakers at the National Assembly on Thursday, following the unveiling earlier in the week of a package of tax cuts designed to boost flagging levels of corporate investment and consumer spending.
As part of its stimulus package, the Korean authorities announced plans to cut the rate of individual income tax by 2%, a cut targeted mainly towards the middle class, and provide more tax incentives for research and development to be undertaken in the country, with the ultimate goal of boosting R&D investment to 5% of GDP by 2012.
Additional tax incentives will be aimed at small companies, and at manufacturing companies which relocate their operations from the capital, Seoul, to outlying regions of the country, who will be able to defer corporate tax payments. The government also wants to make it easier for foreign investors to receive tax breaks.
The new package will, if approved, be in addition to a cut in corporate tax, announced by the government earlier in the year. Under this plan, the corporate tax rate would initially be cut from 25% to 22%, with the rate to be cut still further in coming years, bringing it down to between 10% and 20% by 2013.
However, according to reports in the national media this week, Kang observed that Korea's business tax rates will still be higher than those in place amongst its peers, making it difficult for the country to compete.
"High tax policies do not help the economy. They do not promote hard work, competition and innovation," he was quoted by the Korea Times as observing, raising hopes that further cuts are on the cards.
Speaking on Korean radio on Thursday, meanwhile, the Strategy and Finance Minister suggested that the effects of the latest batch of tax measures will likely be seen around a year after they are implemented.
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