SOUTH KOREA: Corporate Tax Rate Still High, according to Ministry of Economy and Finance.

As published on businesskorea.co.kr, Wednesday 23 November, 2022.

The Ministry of Economy and Finance announced on Nov. 22 that South Korea’s maximum corporate tax rate, 25 percent, is the seventh-highest in the OECD along with those of Spain, the Netherlands and Belgium and the OECD average is 21.2 percent.

“When local taxes are included, South Korea’s maximum is 27.5 percent, the 11th-highest in the OECD,” it said, adding, “The maximum corporate tax rate of Germany is 15 percent but it rises to 29.9 percent after local tax inclusion, that of Japan rises from 23.2 percent to 29.7 percent in this case, and local taxes are high in Italy and Portugal as well.”

South Korea’s corporate tax rate is one of the highest in Asia. That of Hong Kong, the lowest in it, is 16.5 percent. In addition, the local tax is zero in Hong Kong, Singapore and Taiwan.

According to the ministry, the corporate tax revenue-to-GDP ratio of South Korea as of the end of 2020 is 3.4 percent, higher than those of the United States (1.3 percent), the United Kingdom (2.3 percent) and Japan (3.1 percent) and the OECD average (2.7 percent).

The above is because most OECD member states have reduced their corporate taxes for more than a decade and South Korea is not one of them. Since 2008, only six (South Korea, Mexico, Turkey, Slovakia, Iceland and Latvia) out of the 38 have increased their corporate taxes. In South Korea, the 100 largest enterprises bear 41 percent of the total corporate tax revenue. In addition, the effective tax rates applied to them are much higher than those in the United States and so on.

For instance, in 2019, the effective corporate tax rates of Ford and GM were 3.6 percent and negative 2.4 percent, respectively. In other words, GM’s corporate tax payment was smaller than its tax benefits that year. By contrast, the effective corporate tax rate of Hyundai Motor Company amounted to 22.9 percent in 2020, when those of Samsung Electronics and Apple were 21.5 percent and 16.9 percent, respectively.

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