South Korea’s 10 biggest conglomerates, excluding top two Samsung and Hyundai Motor Group, are likely to pay far less in income taxes this year due to a prolonged economic slump. Given that corporate taxes represent more than one-fifth of total national tax, a significant reduction in corporate taxes is expected to put financial burden on the incoming administration.
According to data released by Chaebul.com, a tracker of local business groups, 82 affiliates of the country’s top 10 conglomerates are estimated to pay 11.722 trillion won in taxes this year. The estimates were based on tentative business results for fiscal year 2012 of the listed companies whose fiscal year ends in December.
Though numbers represent an increase of 16.7% or 1.6780 trillion won compared to 10.440 trillion won, a final amount for fiscal year 2011, eight companies out of the top 10 except Samsung and Hyundai Motor Group are likely to pay 12% - 48% less than they did last year.
In terms of a rate of decline in corporate tax, Hyundai Heavy Industries is forecast to top the list. The company will likely pay 365 billion won in corporate tax this year, down 48.1% or 338 billion won compared with 703 billion last year as a result of a drop in earnings before tax.
Hyundai will likely be followed by GS (-37.6%), Lotte (-27.8%), Hanwha (-20.7%), LG (-14.8%), and POSCO (-11.5%), all of which are estimated to suffer more than 10 percent drop.
Hanjin Group (5 subsidiaries) is projected to pay virtually no income tax for the fiscal year 2012 following a year earlier as its subsidiaries including Hanjin Shipping is expected to record massive net loss before tax.
In contrast, Samsung Group (13 units) is forecast to witness its income tax soar 126.7%, or 2.809 trillion won from a year earlier to reach 5.026 trillion won due to its robust global sales. Last year the group paid 2.2179 trillion won in taxes.
The income tax on Hyundai Motor Group (9 subsidiaries) also is expected to rise 15.4% on-year to 3.138 trillion won compared with 2.718 trillion won a year earlier as its earnings before tax are estimated at 15.195 trillion won, up 16.2% from a year earlier.
Jung Seon-sub, CEO of Chaebul. Com said, “Affected by the prolonged economic slump of last year, the country’s 10 biggest conglomerates with the exception two of the country’s biggest companies, Samsung and Hyundai Motor Group, are forecast to pay far less in income taxes this year,” and went onto say, “Most of the smaller companies will also likely see their tax obligations drop this year due to worsening sales.”