South Korea's Bold Tax Reform: A Closer Look

In a surprising move, the South Korean government has announced a comprehensive tax law amendment, marking the first corporate tax increase in eight years. This decision comes at a time when the global trend leans towards reducing corporate taxes to attract businesses.

Impact on SMEs and Large Corporations

The amendment introduces a 1 percentage point increase in corporate tax rates across all brackets, affecting both small and medium-sized enterprises (SMEs) and large corporations. With the highest corporate tax rate for large corporations rising to 25%, and the minimum rate for SMEs to 10%, the business community expresses concerns over the potential impact on investment and growth.

Global Context and Domestic Concerns

Amid a global tariff war and efforts by countries to attract businesses through tax incentives, South Korea's decision to increase taxes stands out. Experts warn that this could deter investment, especially as the temporary investment tax credit for SMEs has not been extended.

Financial Sector and Securities Market Adjustments

The tax burden on financial institutions is also set to rise, with the education tax rate for profitable banks and insurance companies doubling. Additionally, adjustments to the securities transaction tax and the criteria for major shareholders paying stock transfer taxes have sparked debates on their potential effects on the stock market's vitality.