Excessive Tax Burden
Korean semiconductor companies such as Samsung Electronics are burdened with excessive taxes compared to their competitors in the United States and Taiwan, a recent survey shows.
The Federation of Korean Industries has analyzed effective corporate tax rates applied to Samsung Electronics, SK Hynix, Intel, and TSMC over the past three years (2018-2020). An effective corporate tax rate is calculated by dividing corporate tax expenses by net income before corporate tax deduction in consolidated financial statements. It is an indicator of a company's actual tax burden.
The survey found that Samsung Electronics' effective tax rate ranked highest at 27.3 percent in 2020, followed by SK Hynix with 23.7 percent. Those of TSMC and Intel stood at only 11.4 percent and 16.7 percent, respectively. Samsung Electronics had 2.5 times the tax burden of TSMC and 1.4 times that of Intel.
Samsung Electronics' corporate tax expenses (9,997.3 billion won) were double Intel's (4,736.9 billion won) and quadruple TSMC's (2,644.1 billion won). Even considering that Samsung Electronics' net profit before corporate tax deduction was about 36 trillion won, 28 percent and 56 percent more than Intel’s (28 trillion won) and TSMC’s (23 trillion won), respectively, Samsung Electronics paid corporate tax that far exceeded this ratio. SK Hynix's net profit before corporate tax deduction was about 6 trillion won, only 25 percent of TSMC's (23 trillion won), but its corporate tax was 1,478.1 billion won, more than half of TSMC's 2,644.1 billion won.
"Basically, Korea's corporate tax rate (up to 25 percent) is higher than the United States’ 21 percent and Taiwan’s 20 percent, and the United States and Taiwan dwarf Korea in terms of tax support for facility investment, so it is nearly meaningless to compare effective corporate tax rates," said Kim Tae-yoon, head of the Industrial Strategy Team at the Federation of Korean Industries.