Korean Companies Applied an Aggregate 33.2% Tax Burden Ratio to Their Income

Amid a raging controversy surrounding a corporate tax hike, it was found that Korean companies’ tax burden compared to their income is the 11th lowest among 35 OECD member countries. It is lower even compared to major emerging economies such as China, Brazil and India. 

The Korea Trade-Investment Promotion Corporation (KOTRA) said in a recent report titled “Comparison of Investment Environments of Major Countries” that tax accounted for 33.2% of Korean companies’ total income based on data from the World Bank. “Among developed countries, only three nations –- Canada, Ireland and the UK –- had lower effective rates of tax lower than Korea. Even including developing countries, Korea had a relatively low effective rate of tax,” the KOTRA explained.    

The World Bank conducted a survey of companies’ total tax rates which included not only the corporate tax but also quasi-taxes such as costs for employment and health insurance and obligatory contributions in 189 countries and released the results in its 2015 Corporate Environment Assessment Report. The survey aimed to compare tax burdens on companies.  

The World Bank aggregated data of OECD member countries only. The results showed that Korean companies’ tax burden was the 11th lowest among 35 countries. The average tax burden of companies in OECD member countries was calculated at 41.3%, 8.1%p higher than that of Korea. 

In other words, if a Korean company earns 1,000 won, the company pays 332 won in actual tax while a company in an OECD member country, 413 won in actual tax. The tax burdens of French and Italian companies were nearly double the tax burden of Korean companies. Those of Japanese, German and US companies were over 10%p higher than that of Korean companies.   

Among developing countries which compete with Korea to attract overseas investment, the tax burdens of major countries such as China, Brazil, India, Russia and Vietnam outweighed that of Korea. In particular, those of Chinese, Brazilian and Indian companies were about twice as large as that of Korean companies, respectively.