The Korean government wants to raise corporate tax for equal taxation and to expand welfare. However, many corporations oppose raising corporate tax.



The government increasing taxes on ordinary people and reducing taxes on rich people has become controversial. In Korea, corporations are taxed at a standard rate. Under 200 million won in total earnings, they pay 10% of their profits in tax, and from 200 million won to 20 billion won, they pay 20%. Lastly, over 20 billion won, they pay 22%. Recently, there have been some demands to increase corporation tax. I think the tax must be increased.

First, corporation tax in Korea is below the average in the OECD because former president Lee Myung-Bak decreased the tax. The tax rate in Korea (22%) is much less than Japan (39.5%), the US (39.1%), and France (34.4%) and ranked 21st in the OECD. The total amount of corporation tax in 2014 was 42 trillion, 7 billion won. It is 2.3% lower than 2013. However, the tax on the earned income of ordinary workers was increased at the same time. The total tax on earned income was 25 trillion, 4 billion won in 2014. It is 15.5% higher than 2013. There is some imbalance between corporation tax and earned income tax.

Second, the low corporation tax indirectly helps large corporations to get cash assets. The government decreased the tax rate to boost companies’ investment in society. However, companies don’t invest more than before. Huge corporations like Samsung have the greatest cash assets in history. According to 2014 research by CEO Score, the largest corporations and their 76 listed companies have 148 trillion, 520 billion won in cash assets. The group that has the largest amount of cash is Samsung (66 trillion won), and only Hanwha has cash assets under one trillion won among the 10 corporations. Getting such huge money can lead to a negative influence on society. For example, their investment in employment and social welfare hasn’t increased even though their capital has been increasing steadily.

The present corporation tax in Korea is lower than the average in the OECD, and it causes an imbalance between large corporations and ordinary people. Therefore, the Korean government must increase the tax.




President Park pledged to extend employee welfare without raising the tax rate during the presidential election. While the budget for welfare expanded, Park’s government failed to secure sufficient money. Some say the government raised the tobacco price and changed the year-end tax adjustment to make up for the inadequate money. As a result, during an inter-party summit, the opposition argued for collecting taxes through raising corporate tax rather than collecting taxes from individuals. However, raising the corporate tax rate may affect the economy and low-income employees in the long-term. Since raising corporate tax limits economic growth, the corporate tax rate should not be raised.

Raising corporate tax restricts the growth of companies and lessens FDI, or foreign direct investment. The OECD working paper “Tax Structure and Economic Growth” found corporate tax negatively influences the economy. Since many corporations use their income to pay back their debts and to expand their business, raising the corporate tax rate will restrict economic growth. Moreover, corporate tax lessens FDI. According to OECD research, a 1% increase in the corporate tax rate decreased FDI by 3.7%. This limits the expansion of small and medium firms in the long-term. In addition, raising the corporate tax rate reduces investment and the productivity of corporations. Arnold and Schwellnus from CEPII, a French institute for research into international economics, studied the effect of the corporate tax rate on productivity. They found an increase in the corporate tax rate led to less investment and productivity.

In addition, raising the corporate tax rate decreases the wages of employees. From “Corporate Taxes and Union Wages in the United States”, R. Alison and James R. Hines, Jr., did research on which group among consumers, employees, and shareholders have the most burden from a rise in the corporate tax rate. The result was that corporate tax lowers the wages of employees, thus worsening the quality of their lives.

The growth of the economy needs lots of capital. A corporation needs capital from its income, but corporate tax hinders growth. Moreover, workers in corporations get the burden of a decrease in wages and this can badly affect their lives. The government must think about raising other types of taxes to minimize the bad effect on the economy, and corporate tax should not be raised.