OECD reveals report on Korean economy

Pertaining to taxation policies, the OECD recommended to the Korean government that the individual and corporate tax collection base be expanded and taxation not be used as a weapon in relation against industrial policies.

In addition, the OECD revealed that investments are being made based on profitability owing to the restructuring of the corporate and finance sectors, while noting also that foreign currency problems are not expected as foreign exchange holdings exceed US$ 9 billion.

In the report on the Korean economy for 2000, the OECD focused mainly on taxation policies while also touching on the need to expand social safety nets and recommending tax revenues be increased in the mid to long term in order to cover increased fiscal expenditures related to North Korean economic cooperation efforts.

The report mentioned that the tax base, including individual income tax, corporate income tax and value added tax, should be expanded while tax rates should be lowered. In addition, the report advised the government to gradually reduce the utilization of tax policies to control the industrial sector. In connection with the higher tax burden on taxpayers, efforts are needed to minimize the impact taxation will have on corporate decision-making.

It was advised that shareholder rights should be bolstered, bankruptcy regulations be improved, competition be increased and economic circumstances on the whole be enhanced in order for corporate restructuring to be pushed forward by the market.

For chaebol reforms, it was stated that the reform process should be led by the financial sector, under market economy principles and corporate ownership structure transformations.

The forecast for the Korean economy showed a 8.5% growth rate for 2000 and 6% for 2001, which is a 2.5% decrease, illustrating stable growth. Consumer prices were to remain at a stable 3% and, despite the steep fall of the current account surplus, inflation should not be a concern in view of the foreign exchange holdings.