Corporation Tax Will Drop by 1-2 Percent

The corporation tax is likely to be lowered by 1 – 2 percent.

A source from the New Millennium Democratic Party revealed that "NMDP and the Grand National Party agreed on the reduction of the corporation tax on the condition that the government issues the government bonds to preserve the deficit of the budget by the decrease of the corporation tax rate."

Once the corporation tax rate is readjusted, the corporation tax rate for the excessive amount over 100 million won will be 26-27 percent from current 28 percent and for the rate that amount up to 100 million won will be 14-15 percent, decreasing the national tax income by 700 billion won – 1.5 trillion won.

A high official of the Ministry of Finance and Economy said, "NMDP decided to accept the measure to lower the corporation tax rate by 1-2 percent on the condition. The government will implement the measure if the National Assembly approves the decrease of the corporation tax rate."

NMDP has strongly opposed to the GNP`s demand for the reduction of budget, while accepting the reduction of the corporation tax rate on behalf of the economic recovery.

Another NMDP official said, "the reduction of the estimated expenditure cannot be accepted because the budget expenditure must be increased to recover the economic growth rate during the first half of next year to 3 percent. If GNP accepts the plan to increase the government bonds without reducing the estimated expenditure, NMDP may accept the reduction of the corporation tax rate."

NMDP and GNP will conclude the details on the reduction rate of the corporation tax rate by the night of 13th to pass the revised tax law and the national budget for next year in the plenary session of the National Assembly on Dec. 14.

GNP previously presented a revised tax bill to the National Assembly to reduce the corporation tax rate by 2 percent but NMDP and the government has been objected to the bill, insisting that the effect of the reduction of the tax rate for the economic recovery is trifling and it will be difficult to keep the budget balanced.

hcs@donga.com