Taxation Sources Broadened, Tax Rates Reduced

The government will reduce tax rates based on tax revenue prospects for the next five years, said Deputy Premier and Minister of Finance and Economy Kim Jin-pyo today.

The ministry unveiled its mid- and long-term tax reduction scheme in a radio program interview saying, “The government will broaden the source of taxation by revising existing regulations and removing exemptions, and reduce tax rates based on increased revenues.”

“The government will help corporations prepare their investment plans by revealing its tax revenues and future tax reduction plans as early as possible,” Kim said, “And tax on land will also be gradually increased.”

“The related ministries will discuss regulations on the voting rights of financial subsidiaries.” Kim also added, “The government will devise reform goals that can be achieved within five years in consideration of their economic effect.”

As for the recent probes into conglomerates, he said, “When there are wrongdoings, regulators should warn them and hold them accountable for any irregularities. However, the abrupt opening of extensive investigations could lead to misunderstanding and could also have a negative impact on the economy.”

He added, “A premature economic stimulus plan will not be able to deliver on its promises and may also affect the stability of economic growth. Together with the early allotment of state budgets, the government will push ahead with tangible deregulation measures to warm up investor sentiment.”

“Appointments of new people will be a catalyst to make the most of their experience and create a synergy effect for the ministry as a whole,” Kim said regarding new appointments in the Ministry of Finance and Economy including that of the vice minister. “However, we will have to give some consideration to people who passed the national test for high ranking public officers before others.”

He also added that maintaining regulations on conglomerates holding stocks in either affiliated or unrelated firms as well as introducing a class action system to the equity market will promote ratings and the overall value of large Korean corporations.

Kwang-Hyun Kim kkh@donga.com