The Minjoo Party floor leader Woo Won-shik, Liberty Korea Party floor leader Jung Woo-taek and People’s Party floor leader Kim Dong-chul announced on December 4 that they reached an agreement on the budget bill for next year.
According to their agreement, the highest corporate tax rate applied to super-large companies has been raised to 25% from 22% and the tax base to which the rate is applied has been adjusted to 300 billion won (US$270 million) or more from 200 billion won (US$180 million) or more. When it comes to an increase in income tax to be applied to top income earners, the floor leaders agreed to follow the government’s plan.
The current corporate tax rate is divided into 10% for a tax base of zero to 0.2 billion won, 20% for a tax base of more than 200 million won (US$180,000) to 20 billion won (US$18 million), and 22% for a tax base of more than 20 billion won (US$18 million). If the floor leaders’ agreement is maintained, more than 300 billion won (US%270 million) is newly included with a tax rate of 25%.
The number of South Korean companies with a tax base of more than 300 billion won (US$270 million) is 77 according to the 2016 corporate tax reporting. Their ratio is less than 0.02% in view of the numbers of corporations and those actually paying corporate taxes, which totaled 590,000 and 330,000, respectively. The South Korean government is estimating that the higher corporate tax rate ceiling will lead to an additional corporate tax income of 2.3 trillion won (US$2.0 billion).