SEJONG, Nov. 21 (Yonhap) -- South Korea needs to maintain relatively low corporate tax rates in order to help sharpen its competitive edge in businesses and boost corporate investment, the finance ministry said Thursday.
In a report submitted to Rep. Na Seong-lin of the ruling Saenuri Party ahead of a parliamentary interpellation session, the ministry said that the burden of paying corporate tax in South Korea is heavier than in other advanced countries.
"It is necessary to keep corporate tax rates lower than other neighboring competing countries in order to enhance business competitiveness and stimulate their investment," the ministry said.
Currently, the corporate tax rate on taxable income exceeding 20 billion won (US$18.9 million) stands at 22 percent here, which is higher than 16.5 percent in Hong Kong, 17 percent in Singapore and 17 percent in Taiwan.
South Korea has slashed its corporate tax rates over the past decade.
The Kim Dae-jung administration cut the rate from 30 percent to 28 percent, which was also lowered to 25 percent during the Roh Moo-hyun administration. The previous Lee Myung-bak administration lowered the rate to the current level.
The ministry said that the burden of corporate tax here is larger than other neighboring countries, saying that it was equivalent to 3.5 percent of the gross domestic product (GDP) in 2010. It is higher than the Organization for Economic Cooperation and Development average of 2.9 percent.
The ministry also said that it is "desirable" to simplify the country's corporate tax system, which applies different tax rates in accordance with the amount of corporate profits.
Currently, the corporate rate for taxable income of 200 million won or less is 10 percent. The rate for taxable income ranging from 200 million won to 20 billion won is 20 percent, and that for income exceeding 20 billion won is 22 percent.
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