Quasi-tax Puts Heavier Burden on Corporations

The Federation of Korean Industries said yesterday that domestic firms pay more quasi-tax than corporate tax, adding the amount of quasi-tax is twice the amount spent on research and development in certain sectors.

Last year, the average tax imposed on Korean firms jumped 81 percent from 2000. On the other hand, the amount of quasi-taxes surged a whopping 325 percent over the same period.

This shows previous administrations created quasi-taxes to make up for a decrease in tax revenue while saying they streamlined unnecessary financial burden on corporations.

The federation released the result of its survey, "Quasi-tax Imposed on Major Corporations and Measures to Improve the Financial Burden on Corporations" conducted on 104 member companies.

The report said, “The 104 corporations paid 7.47 trillion won, or 71.8 billion won per company, in quasi-taxes last year.”

The federation said quasi-taxes include social costs and donations required by the Framework Act on the Management of Charges and social insurance fees to be covered by corporations.

“The amount of quasi-tax is 1.5 times larger than corporate tax of 4.77 trillion won, and accounts for 29.2 percent of all tax revenue," it said. If compared to major management indices, quasi-taxes account for 2.5 percent of sales, 30.7 percent of capital, and 40.8 percent of net profit.”

“Given the share of R&D in corporate sales ranges from 1.21 percent (average of all industries) to 1.81 percent (manufacturing), quasi-taxes are up to twice as large as R&D investment.”

The report said quasi-tax puts a heavier financial burden on corporations, but how much is collected and where it is spent are unclear.

The federation urged the government to tentatively establish a bill on managing quasi-tax and release how much quasi-tax is collected and where it is spent.

bookum90@donga.com