New Korean President To Slash Taxes

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

27 December 2007

President-elect of Korea Lee Myung-bak, who will be inaugurated in February, has proposed swingeing tax cuts and other market-friendly policies for his new administration.

The existing administration has not been particularly business-friendly, as many foreign investors have found to their cost. Lee, a former chief executive of Hyundai Construction and Engineering, has vowed to put a priority on reinvigorating the economy, promising 7% economic growth by stimulating domestic and foreign investment.

Lee has pledged 12.6 trillion won in tax cuts, lowering the maximum corporate tax rate by stages to 20% from the current 25% and lowering oil-related taxes by 10%, paying for it by reducing government expenditures by as much as 20 trillion won. He also promises reductions in real-estate taxes.

Lee says he will ease rules that restrict industrial groups from controlling banks. The current law bans industrial firms from owning more than 5% of a bank. He will also privatize major swathes of state-owned economic sectors, he said.

Lee's party is in opposition in the legislature, although it is expected to win elections due in April, 2009, leaving four years in which Lee can implement his policies.

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