Corporate Tax Revenues Drop by 6.8 Tril. Won in Q1
The Ministry of Economy and Finance announced on May 12 that the Q1 national and corporate tax revenues decreased by 8.5 trillion won and 6.8 trillion won as compared with the same period of last year, respectively.
At present, corporate taxes account for more than 20 percent of the entire tax revenue and the ratio is second only to that of income taxes. The Moon Jae-in administration raised the maximum corporate tax rate from 22 percent to 25 percent (27.5 percent including local taxes) in 2018 with those of the United States and Japan at 21 percent and 23.2 percent, respectively. The idea was to increase its welfare spending by collecting more corporate taxes. The annual corporate tax revenue decreased in 2013 and 2014, rebounded in 2015, and continued to increase until last year.
The government’s plan was somewhat effective until last year, when the corporate tax revenue totaled 72.2 trillion won. Although it did not reach the government’s target amount, 79.3 trillion won, it increased by 1.2 trillion won in one year.
The target was not reached because economic conditions deteriorated. Experts point out the increased burden on companies during last year’s recession backfired in the form of the less-than-expected corporate tax revenue.
This year, the revenue is likely to show a double-digit decline with semiconductor companies’ operating profits plummeting. The revenue is estimated to fall for the first time in six years. In addition, next year’s corporate tax revenue is unlikely to increase in that it will reflect this year’s business performance, which is being seriously affected by the COVID-19 pandemic. In other words, next year’s national finance will be very tight unless automakers, airlines and so on recover from repeated shutdowns.