Latest news with #MinistryofEconomyandFinance
Hans India
16 hours ago
- Business
- Hans India
South Korea: Lee govt unveils first tax reform plan aimed at increasing revenue
Seoul: The South Korean government on Thursday unveiled a comprehensive tax reform plan aimed at strengthening the national revenue base, which includes raising the top corporate tax rate and tightening capital gains taxation by broadening the definition of large shareholders. The reform marks the first major tax overhaul under President Lee Jae Myung, who took office early last month, and comes as part of the administration's efforts to restore fiscal soundness and address what it sees as tax benefits tilted toward large corporations and high-income earners, Yonhap News Agency reported. The government estimates the reform package will generate an additional 8.17 trillion won (USD 5.87 billion) in tax revenue over the next five years. According to the Ministry of Economy and Finance, the top corporate tax rate will be raised by 1 percentage point across all four tax brackets, effectively rolling back cuts introduced by the previous Yoon Suk Yeol administration in 2022. Currently, the corporate income tax is levied at 9 percent for an annual income of up to 200 million won, 19 percent for income between 200 million and 20 billion won, 21 per cent for income between 20 billion and 300 billion won, and 24 percent for income above 300 billion won. The latest proposal would increase the rate for each bracket by 1 percentage point, restoring the highest rate to 25 per cent. The conservative Yoon administration had cut the top corporate tax rate to 24 percent in 2022 to stimulate private sector investment. The proposed changes are subject to approval by the National Assembly. If passed, the revised corporate tax rates will apply to business income earned starting next year, with increased revenue expected to start materializing in 2027. In a separate measure to increase capital gains tax revenues, the government also plans to lower the threshold for being classified as a large shareholder from 5 billion won to 1 billion won. The move effectively reverses a policy introduced by the previous administration, which had eased capital gains tax obligations by raising the threshold for large shareholders from 1 billion won to 5 billion won. Under the current law, major shareholders in listed companies face a capital gains tax rate of 22 to 27.5 per cent, including local income tax. The tax applies to stock sales made during the previous year, regardless of price fluctuations. "The resources secured through these measures will be reinvested into businesses to support the development of ultra-innovative products," First Vice Finance Minister Lee Hyoung-il said during a press briefing. The reform is seen as part of President Lee's broader push to reverse the previous administration's tax policies, which the ruling Democratic Party has criticized as favoring the wealthy and large conglomerates. "Our revenue base has rapidly weakened over the past three years, leading to a significant rise in the nation's overall tax burden," Vice Minister Lee said. "This reform focuses on restoring the foundation of sustainable public finance." The plan also includes adjustments to the education tax levied on financial and insurance companies in place of value-added tax. For companies earning more than 1 trillion won in annual revenue, the education tax rate will be increased from the current 0.5 per cent to 1 percent, the ministry said. If realized, this would mark the first time in 45 years, since the education tax was introduced in 1981, that a new tax bracket and higher rate have been established. Additional measures aim to enhance the competitiveness of strategic future industries, including artificial intelligence (AI), by expanding R&D tax credits and investment incentives, officials said. Tax support for low- and middle-income households, as well as small business owners, will also be expanded to help stabilize livelihoods and support inclusive growth.
Korea Herald
3 days ago
- Automotive
- Korea Herald
With exports down, Korea bets on domestic EV tax breaks to protect supply chain
The Korean government is considering a tax credit for domestically produced electric vehicles amid rising concerns about a potential decline in automotive production. The proposed credit is part of the ruling Democratic Party's broader plan to support key strategic technology sectors, including future mobility, clean hydrogen, displays, biomedicine, batteries and semiconductors. According to the party's bill proposals, companies could receive a corporate tax exemption of up to 30 percent of their production costs, provided both production and initial sales occur within South Korea. 'We are considering the introduction of a domestic production promotion tax program for strategic industries, but details are yet to be clarified,' said an official from the Ministry of Economy and Finance's tax policy division. With trade accounting for over 80 percent of Korea's gross national income, the government has been cautious about introducing measures that could be seen as production subsidies and trigger unfair trade disputes. However, this stance appears to be shifting, as growing global protectionism raises concerns about the potential weakening of Korea's automotive industry. 'There are many possible approaches, but after careful consideration, I concluded that a tax system that promotes domestic manufacturing is the most effective,' said President Lee Jae Myung, then a presidential candidate from the Democratic Party of Korea, during a visit to Hyundai Motor's Korean plant in February. 'Japan and the US have already moved in this direction. Korea also needs a tax deduction for local production.' Japan, for example, offers corporate tax credits of up to 400,000 yen ($2,700) per electric vehicle produced domestically. France and India are also intensifying efforts to localize their electric vehicle supply chains through targeted subsidy programs and protective tariffs. In the US, federal tax credits for domestically assembled EVs are currently available but set to expire in September. Meanwhile, the US has imposed a 25 percent tariff on imported vehicles and parts to encourage domestic production and secure its automotive supply chain. The move has already had a significant impact on Korea's auto industry, particularly among Korea's parts suppliers, many of which have been transitioning their portfolios toward EV components in response to the growing electrification trend. 'High tariffs in the US, which account for over half of our total automotive exports, led to a 16.5 percent decline in exports to the US in the first half of the year. For EVs, the drop was even steeper — 88 percent,' said Kang Nam-hoon, CEO of the Korea Automobile Manufacturers Association, calling for swift implementation of a production-focused tax incentive. Although the Korean government is currently in talks with the US to resolve tariff issues, many industry experts foresee long-term challenges for Korea's automotive base, as countries increasingly move to secure their supply chains. 'The World Trade Organization system, which once drove global division of production, is now essentially meaningless,' said Lee Hang-gu, a researcher at the Korea Automotive Technology Institute. 'There's no effective response left against the aggressive subsidy programs of the US and China. And now, every country is doing the same.' Essential move, lingering worries Experts say efforts to reduce supply costs are essential to help Korea's automotive supply chain withstand growing export challenges amid an increasingly unstable global trade environment. 'When major automakers moved production overseas, small and mid-sized Korean parts suppliers were able to follow and continue exporting their products. But that may no longer be possible,' Lee Hang-gu added. 'Many could be limited to supplying parts only for vehicles produced in Korea, but the domestic market is far too small to sustain their businesses.' In 2024, only 1.7 million new cars were sold in Korea, while the country produced a total of 4.1 million vehicles. To minimize the risk of trade disputes, Korea's proposed production promotion tax system is being designed with a restriction: It would apply only to products sold within the domestic market. Under the WTO rules, subsidies are generally subject to dispute only if they are linked to exports and cause adverse effects on other countries' industries. Additionally, the WTO allows governments to offer subsidies exclusively to domestic producers, as long as they do not discriminate against imported goods. Still, concerns remain that such a measure could weaken Korea's negotiating position as global trade tensions persist. 'We must remember that this could also encourage other countries to adopt similar policies to promote their local industries,' said Kwon Yong-joo, professor of automotive and transportation design at Kookmin University. 'While this measure might help protect our supply chain in the short term, it remains uncertain whether such support would be more effective to hold car production domestically than subsidies directed at buyers.'
The Star
21-07-2025
- Business
- The Star
Cambodian ministries going digital with e-invoice platform
The exterior of the Ministry of Economy and Finance headquarters. - The Phnom Penh Post PHNOM PENH: The Royal Government of Cambodia, through the Ministry of Economy and Finance, has mandated that the budgetary units of six additional ministries will now employ electronic invoices (e-invoices) for public procurement expense payments. Suppliers issuing invoices to these ministries must also issue e-invoices. This directive is part of the second step of Phase 1 of Cambodia's Electronic Invoice System, as detailed in an official notice signed by finance minister Aun Pornmoniroth on July 14. According to the notice, the policy aligns with phase one of the seventh-mandate government's Pentagonal Strategy, Cambodia's Digital Economic and Social Policy Framework 2021–2035 and the Joint Action Plan of the Public Financial Management Reform Program (Phase 4). The finance ministry completed the development of the Cambodia e-Invoice System, which officially launched on January 22, 2025, with the first phase implemented within the finance ministry and the Ministry of Environment. To promote the adoption of e-invoices, the programme was expanded to the Ministry of Agriculture, Forestry, and Fisheries, Ministry of Commerce, Ministry of Industry Science Technology and Innovation, Ministry of Education Youth and Sport, Ministry of Posts and Telecommunications, and Ministry of Civil Service, as of July 14. The Cambodia e-Invoice System is a government-managed IT platform for exchanging invoices electronically between sellers, service providers and service recipients. It authenticates and validates e-invoices officially, eliminating the need for printed copies. The system aims to Improve transparency and accountability in public financial management, support Phase 4 of the government's public financial reform programme, enhance tax compliance, promote sustainable development and prepare Cambodia for Asean digital economic integration. The MEF has issued several key implementation guidelines. The ministries may only accept e-invoices for public procurement-related expense payments. These must be sent electronically, validated and registered through the Cambodia e-Invoice System. They must notify suppliers to register and become members of the e-Invoice System if they have not already done so. The General Department of Digital Economy will operate the system, while the General Department of Budget and General Department of National Treasury will support implementation by verifying and integrating e-invoices into public financial management workflows. Chhin Ken, president of the Cambodia Digital Tech Association, told The Post on Tuesday (July 15) how e-invoicing is gaining global momentum, and noted that Cambodia is catching up. The system improves data tracking, streamlines financial workflows and enables both government and private sector institutions to better manage revenue and expenditure. 'This is a positive and modern reform. It helps business owners reduce paperwork and lets the government instantly access invoice data by entering codes into the system — a secure and efficient process that prevents fraud,' he said. He also encouraged business owners to embrace the change. 'As someone in the tech sector, I strongly encourage businesses to follow this directive. It will improve productivity, enhance operational efficiency and reduce issues faced by ministries, institutions, and companies alike,' he added. - The Phnom Penh Post/ANN
Korea Herald
14-07-2025
- Business
- Korea Herald
Korea mulls formal role for secretive F4 policy talks
South Korea is poised to transform its clandestine macroeconomic and financial meetings involving top policymakers into a transparent, institutionalized body, sparking debates over the potential implications for decision-making agility and crisis response capabilities. According to sources on Monday, the government, through State Affairs Planning Committee, is proposing to establish a formal legal framework that would explicitly define the purpose, roles and responsibilities of the so-called F4 meeting, a weekly gathering of the heads of the Ministry of Economy and Finance, the Bank of Korea, the Financial Supervisory Service and the Financial Services Commission. The F4 meeting was launched by former Finance Minister Choo Kyung-ho in 2022, but similar forums have been operating for several decades. Historically, governments have maintained confidentiality over such discussions, partly to prevent sensitive issues from becoming public and provoking market upheaval. The move is designed to increase transparency by providing public access to agenda items and meeting minutes, positioning the body as a central coordinating authority across various economic policy domains. Currently, F4 meetings are conducted without publicly disclosing schedules, topics or contents. The meeting has been playing a crucial role as an informal but essential crisis management and coordination mechanism. Its significance lies in its ability to rapidly respond to market turbulence and systemic risks. Past instances include its handling of liquidity concerns during the Lego Land crisis in 2018 and the swift response to market shocks during the fallout from the Silicon Valley Bank collapse. The forum also serves as a platform for early policy discussions, helping policymakers reach consensus before implementing measures that could impact markets. In December, amid a sharp depreciation of the won and a significant decline in the stock market following former President Yoon Suk Yeol's declaration of martial law, officials convened a series of F4 meetings to deliver reassuring messages to international markets and stabilize sentiment during a period of heightened volatility. The government has also come under scrutiny amid claims that, immediately after Yoon's emergency declaration, F4 meetings discussed follow-up measures related to the martial law order. This suspicion has fueled calls for giving the forum formal legal status to enhance transparency and oversight. Experts suggest that while making these discussions public could democratize policymaking and bolster legitimacy, it might also hinder the government's ability to act decisively in volatile economic conditions. While laws and policies often become clearer during implementation, revealing draft plans still in discussion to the markets and media could lead to adverse reactions, according to Jun Kwang-woo, chairman of the Institute for Global Economics. He also participated in F4-like meetings during his tenure as the first chairman of the country's Financial Services Commission from 2008 to 2009. 'Premature disclosure of deliberations on sensitive issues could ignite unnecessary speculation and market instability,' he said. Such a move could improve coordination, but it must be carefully managed to avoid undermining policy flexibility. 'If the F4 meeting is elevated to a central macro-financial overseeing body, communication between the related government agencies will be strengthened, helping to prevent policy discrepancies,' said Joo Won, head of the Economic Research Division at the Hyundai Research Institute.
Korea Herald
08-07-2025
- Business
- Korea Herald
South Korea races to avert 25% tariffs as Trump extends deadline
Analysts say US less likely to ease tariffs on cars, steel, stoking concerns for key Korean exports South Korea has until Aug. 1 to cut a deal with the US after President Donald Trump delayed crushing 25 percent tariffs on Korean imports, with Seoul vowing all-out efforts to negotiate its way out of looming duties. Trump on Monday posted a letter to South Korean President Lee Jae Myung on Truth Social, warning that the 25 percent 'reciprocal' tariffs will take effect next month unless South Korea eliminates its tariff and nontariff policies and trade barriers. Along with Korea, Trump disclosed that at least 14 other countries' imports are set to face similar tariffs starting in August. The last-minute extension, formalized in an executive order Trump signed later that day, gives Seoul temporary reprieve from the tariffs it had been bracing for, as Trump's original 90-day pause from April was set to expire Wednesday. Since then, Washington has imposed a universal 10 percent duty on Korean goods while engaging in trade talks. Later in the day, Trump appeared to leave the door open for a further delay. 'I would say firm, but not 100 percent,' Trump told reporters at the White House when asked whether the new August deadline was final. 'If they call up and they say we'd like to do something a different way, we're going to be open to that.' In response, South Korea's Industry Ministry said Tuesday that the letter effectively extended the grace period for imposing reciprocal tariffs and that it will accelerate negotiations to strike a 'mutually beneficial' deal. 'We will step up negotiations to reach a mutually beneficial result during the remaining time to swiftly resolve the uncertainty from tariffs,' the ministry said in a statement. 'We also plan to use this as an opportunity to improve domestic systems and regulations to resolve the US trade deficit, which is Washington's primary interest, and boost key industries through a bilateral manufacturing renaissance partnership.' The Ministry of Economy and Finance held an emergency meeting Tuesday morning to assess the impact of Washington's latest move. 'Given the possibility of increased volatility in domestic and global financial markets depending on how US tariffs will unfold, we will respond with heightened vigilance,' said acting Finance Minister Lee Hyoung-il at the meeting. 'Under close coordination with related agencies, we will closely monitor tariff developments and impact on financial and real economy. If the market shows excessive volatility that deviates from our economic fundamentals, we will act swiftly and decisively in accordance with our contingency plans.' The Industry Ministry was to hold an emergency meeting with industry officials and related government agencies in the afternoon. The meeting, chaired by First Vice Minister Moon Shin-hak, will gather government officials as well as representatives from key export sectors including automotives, steel, batteries and biotech. Companies including Hyundai Motor, Posco and LG Energy Solution were expected to participate. One initial concern was that Korean goods could get hit twice due to the existing sector-specific tariffs of 25 percent on cars and 50 percent on steel and aluminum that are already in place. However, the White House clarified that new reciprocal tariffs would not stack on top of sector-specific tariffs. Still, economic impact on those key export sectors appears inevitable. South Korean officials have been working to remove the sector-specific tariffs in their talks with the US side, but observers say Trump is unlikely to budge on automobiles and steel. 'By explicitly stating that Section 232 tariffs on steel and autos are separate, it appears less likely that the US will budge on the duties, making it harder for Korea to negotiate the relief,' said Jang Sang-sik, head of the Korea International Trade Association's International Trade and Commerce Research Center. Chang stressed that in order to produce a tangible outcome by end of July, Korea could benchmark the approach taken by Vietnam, which recently clinched a deal with the US to reduce the planned 46 percent rate to 20 percent. 'Korea needs to present a visible plan to reduce the trade surplus with the US, which could include expansion of government-led imports in defense and energy, as well as boosting imports in agricultural goods, consumer products and machinery.' Jang also stressed the need to review nontariff barriers, such as easing regulations on digital platforms, pharmaceuticals and the agricultural quarantine and certification process, which could offer US companies better access to the Korean market.
