[Diagnosis of the 22nd National Assembly] Corporate Tax Relief to Promote Investment in Strategic Industries

Easing Corporate Taxes to Promote Investment in Strategic Industries

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The Center for Free Enterprise (CFE) is researching and analyzing bills that were either passed or introduced in the 22nd National Assembly and that contribute to advancing liberal values, such as achieving a small and efficient government, dismantling and reforming outdated regulations, minimizing government intervention in private businesses and market order, and guaranteeing autonomy.

■ Introduction

As the fragmentation of global supply chains and the wave of protectionism accelerate, countries are each making strenuous efforts at the national level to foster strategic industries. Among the most effective ways to encourage voluntary technological innovation by businesses and investment based on a long-term perspective, tax relief stands out above all. By offering exceptional tax incentives rather than relying on artificial controls and government directives, it is possible to enhance the virtuous cycle of private capital, while also allowing businesses to invest and hire with greater confidence based on the expectation of generating higher profits. In this sense, easing corporate taxes to promote investment in strategic industries can be seen as a representative liberal solution for industrial development.

This report examines the status of the introduction and handling of partial amendment bills to the Restriction of Special Taxation Act, among those introduced after the opening of the 22nd National Assembly, aimed at drawing investment in R&D, facilities, and employment in the field of national strategic industries, and compares the contents of each bill.

■ Status of Bill Introduction and Deliberation

With the opening of the 22nd National Assembly, many lawmakers from both ruling and opposition parties introduced bills to extend the sunset deadline for tax credits related to national strategic technologies or to expand the scope of tangible investment eligible for tax credits beyond the existing categories. However, as of October, during the ongoing 2024 regular session of the National Assembly, no bill has yet been processed through bipartisan agreement.

At the same time, some lawmakers have drawn attention by introducing highly unconventional bills aimed at dramatically promoting investment in strategic industries, going beyond the simple extension of sunset provisions. The status of the bills introduced is as follows.

■ Analysis and Implications

While many lawmakers have mainly introduced bills to extend the sunset period for special tax credit provisions related to national strategic technologies from the current December 31, 2024, by anywhere from 3 to 10 years, lawmakers such as Lee Sangsik of the Democratic Party of Korea and Park Soo-young of the People Power Party have introduced bills to raise the tax credit rate.

Notable among the more unusual bills are those introduced by Kim Sanghoon and Jung Jinuik. Kim Sanghoon of the People Power Party introduced a more far-reaching bill that goes beyond granting tax credit benefits against corporate taxes paid after operating profits are generated, by allowing companies to receive a refund for all or part of any unused credit amount regardless of whether they made a profit or a loss.

Meanwhile, Jung Jinuik of the Democratic Party of Korea focused on the semiconductor industry, where the supply of new equipment is not smooth, increasing the share of purchases of used equipment, and where used equipment prices approach 80% of those of new equipment, creating a heavy cost burden. In response, he introduced a specific bill that would also allow tax credits for investment in used goods. From a similar perspective, Lee Sangsik of the Democratic Party of Korea introduced a bill to include land and buildings for facilities commercializing national strategic technologies among the assets eligible for tax credits.

It is an encouraging sign that, across party lines, there is a shared political push to provide tax support for companies investing in national strategic technologies. Accordingly, there are growing expectations for the swift review and bipartisan passage of related bills during the first regular session of the 22nd National Assembly.

Wiki:

https://www.cfe.org/w/bbsDetail.php?idx=113

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Original title: [22대 국회 진단] 전략산업 투자 촉진을 위한 법인세 완화

Author: Ju-jin Yoon

Date: 2024-10-21

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=bill&pn=1&idx=26932