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New Tax Breaks To Boost South Korean Economy

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

07 February 2017


In its work report for 2017, the South Korean Ministry of Strategy and Finance has indicated that it will focus on boosting South Korea's currently-weak economic growth, in part through fiscal reforms.

For example, the Ministry said that it would introduce an "investment-friendly as well as employment-friendly" tax system, and expand tax support for working- and middle-income classes. It has committed to redesigning tax incentives "for fairer taxation and improved tax transparency," and reducing compliance costs by upgrading tax regulations and simplifying the tax code.

Within its efforts to promote domestic consumption, tax breaks will be provided for new car purchases if they replace old diesel vehicles. There will be a temporary 70 percent individual consumption tax cut and a 50 percent registration tax reduction, until June 2017.

In addition, South Korea will work towards the completion, as fast as possible, of the bilateral and multilateral trade treaty negotiations that are currently underway, including towards the Regional Comprehensive Economic Partnership and the Trade in Services Agreement.

With regard to South Korea's current fiscal position, the Ministry noted that its tax revenue (excluding social security contributions) has risen from 17.9 percent of gross domestic product (GDP) in 2013 to 18.9 percent in 2016. The Government is to accelerate parliamentary passage of the Fiscal Soundness Act that will limit the level of government debt below 45 percent of GDP and its fiscal deficit to below three percent of GDP.

TAGS: compliance | Finance | tax | value added tax (VAT) | sales tax | tax incentives | fiscal policy | gross domestic product (GDP) | trade treaty | agreements | Korea, South | tax breaks | revenue statistics | regulation | trade

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