Tax Reforms Represent Double Edged Sword For Korean Businesses

by Mary Swire, Tax-News.com, Hong Kong

28 January 2003

Reporting on the raft of tax reforms planned by South Korea's President-elect, Roh Moo-hyun, the Korea Times suggested this week that when introduced, the tax package is likely to be something of a double-edged sword for the business community.

According to the national newspaper, in an attempt to bridge the gap between rich and poor, the incoming administration plans to plug loopholes in the inheritance and gifts tax regimes which have traditionally been used to evade taxes on transfers of wealth and managerial rights, and increase taxes on real estate ownership, whilst cutting them on the transfer of property ownership.

However, it is not all bad news for the corporate sector. According to the Korea Times:

'The next administration will try to appease the corporate sector with new business-friendly taxation rules. It is moving to reduce the scope of quasi-taxes accused of undermining business activities.'

'The transition team has also decided to introduce a consolidated taxation system, in which subsidiaries of the same parent firm will be allowed to pay corporate tax on their combined profits and losses, helping them reduce income tax.'

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