This study compares the effective corporate tax rates in Korea before and after the reform of the tax support system, analyzing the margin of difference and suggesting proper reform measures. The emergence of the World Trade Organization (WTO) regime with the end of the Uruguay Round is causing profound and tremendous changes to Korea’s economic environment. The Uruguay Round Agreement, in particular, divides tax subsidies into forbidden, offset and permitted subsidies, striking down the first and allowing for limited retributive actions on the second. The agreement therefore forces Korea to overhaul and reform its subsidy system.
The empirical analysis of the anticipated ripple effects that the tax support reform will have on industries in Korea yielded the following conclusions. First, the abolition of the forbidden subsidies will not dramatically raise the burden placed on businesses. The accelerated depreciation system has already been repealed, so eliminating the forbidden subsidies will not have much of a direct effect. In fact, Korean industries are expected to actively absorb the effect of these forbidden subsidies into their general depreciation. Some changes are in order, however. As the investment tax deductibles offer significant tax exemption effects, they need to be converted into permitted subsidies through a reform of the tax system. The investment tax deductibles should also be reformed and reinforced for their primary beneficiaries, i.e., small- and medium-sized businesses. Some of the permitted subsidies need to be eliminated in order to eliminate waste and other harmful repercussions on the Korean business cycle.
UR타결에 따른 산업별 조세지원제도 개편방안(Uruguay Round: Reforming the tax support system for industries in Korea)
서울 : 한국개발연구원
|Series Title; No||정책연구시리즈 / 95-05|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|
|Holding||KDI; KDI School|