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Country Rankings - Korea, South


  • Feb 15, 2017   Korea, South: in shape

    Some of the more alarmist economic analyses would have you believe that the South Korean economy is in peril. That there is an over-reliance on exports to key economies like the United States, the EU, and China, an unhealthy concentration of wealth and economic power in a handful of large family-owned conglomerates, and a corruption problem. These things may well be true. However, economically at least, the country is in fairly good shape. Bloomberg ranked South Korea as being the country with the world's most innovative economy in 2016, and its tax system for companies stacks up well against regional competitors, with a headline corporate tax rate of 22 percent. The Government is also striving to improve the tax system, with the intention of boosting domestic consumption and encouraging corporate investment. Within its proposed policy framework for 2017, announced just last month, the South Korean Ministry of Strategy and Finance has announced various tax changes to counteract the continued economic uncertainties, including measures to create jobs and support new growth industries. This includes an extra two percent corporate tax credit for posts created in projects that begin this year, a higher corporate tax credit for new job positions, and an expansion of the research and development tax credit scheme. South Korea has often been in the world news headlines for the wrong reasons lately, but on the tax front it's not all doom and gloom for companies.
    Source: http://www.tax-news.com/news/New_Tax_Breaks_To_Boost_South_Korean_Economy____73407.html


  • Dec 13, 2016   Korea, South: uncertain

    Those who know a bit about English history might be familiar with the rhyme that describes the fate that befell King Henry VIII's six wives: divorced, beheaded, died, divorced, beheaded, survived. The rate at which presidents and prime minister are falling by the wayside, you could almost apply the rhyme to events in 2016. Perhaps something like: impeached, resigned, died, impeached, resigned, survived. Given New Zealand Prime Minister John Key has chosen his moment to go – essentially quitting while ahead – he can probably claim to be the survivor. President Park Geun-hye, on the other hand, is facing a long and tough fight for political survival after members of parliament voted last week to launch impeachment proceedings against her. The attempt to topple Park shares characteristics with the other major impeachment this year – that of Dilma Rousseff in Brazil. In both countries, there is rising anger about corruption, cosy relationships between business elites and political leaders, and a general railing against the "establishment" in general. If the result is that we see less corruption in these countries, and in the developing and emerging economies generally, then this is surely a good thing for investors. For high levels of graft are hardly conducive to a stable and predictable business environment. Problematically, though, the journey to get there is also an uncertain one. In Brazil, it was a year ago that the impeachment petition against Rouseff was accepted by the President of the Chamber of Deputies. But it took until August 31 to resolve the matter – in other words, eight months of political uncertainty was the result. Similarly, in South Korea, the impeachment process of Park could take up to six months. Given that South Korea is at an important juncture for its economy and its tax regime, the timing of this is not perfect. There is currently a debate going on regarding fiscal policy, with some calling for corporate tax cuts to help stimulate investment and the economy and others saying fiscal consolidation should be the priority, and the wealthy should pay through tax hikes. Even the IMF Board was split in its review of the Korean economy earlier this year over whether there is fiscal space to implement necessary economic and social reforms without tax hikes or an expenditure cut, and the Fund is never usually short of an opinion on a nation's tax regime! Therefore, we can add South Korea to the growing list of countries where investors face political, legal, and tax uncertainty.
    Source: http://www.tax-news.com/news/South_Koreas_2017_Budget_To_Hike_Top_PIT_Rate____72895.html


  • Jul 11, 2016   Korea, South: Trending

    In the olden days, taxes were used to raise money, initially to help governments wage wars, then later to fund public services. Taxes still help governments wage war and run public services of course, but they are now much more than mere revenue-raisers. They are an instrument of economic policy, and a symbol of the "social contract" between rulers and the ruled. Thus, governments cut taxes in an attempt to stimulate the economy, and raise them to cool overheating markets (it wasn't that long ago, in the pre-crisis age, that the IMF would routinely advise countries to raise taxes because their economies were growing too fast). That taxes are typically used also to promote income distribution makes tax policy a political issue. Now taxes are so politicized, it's very hard to get rid of one – even when it could be argued that it serves little purpose. And South Korea's debate about corporate tax got me thinking about the role of corporate tax in particular. To most people it would unthinkable for a government to abolish income tax on large corporations, as they often wield more clout and influence in the world (and have more money) than many small countries. However, some suggest that corporate taxes cause more problems than they solve. Certainly, in absolute terms, corporate taxes raise a lot of money. However, relative to other taxes, their importance to the fisc is diminishing in many countries. This is partly because corporate tax rates have fallen worldwide over the last 10 to 15 years, and the financial crisis caused profits to fall. However, it is also because governments now lean more heavily on individuals and consumers for revenue, and companies are apt to avoid corporate taxation by various legal means.
    Source: http://www.lowtax.net/news/South-Korea-Rejects-Calls-For-Corporate-Tax-Hike----71623.html


  • Aug 10, 2015   Korea, South: wobbling

    While the UK seems at last to be getting to grips with its budget deficit, South Korea seems to be travelling in the opposite direction. The unfortunate outbreak of Middle East Respiratory Syndrome (MERS) earlier this year certainly didn't help matters, with the Government forced to divert resources to contain the disease. However, the fact is that the South Korean economy, and the Government's finances, were already beginning to wobble well before MERS struck. In a sense, South Korea is not that much different to many other major emerging economies in the Asia-Pacific region, which are struggling to match the stellar rates of economic growth seen before the global financial crisis. However, most countries are still seeking opportunities to reduce corporate taxes to improve the look of their shop window, and to let indirect taxation take more of the strain to fund all the things that governments pay for these days. In this respect, Korea could see itself swimming against the current. The supplementary budget bill approved recently allocates an additional USD4.6bn to offset falling tax revenues, and another USD3.4bn to increase public spending. Presumably, the Government will have to borrow this money. Indeed, the Government has conceded that the budget deficit will be 1 percent higher this year than anticipated just a few months ago. The shortfall in tax revenues has led to suggestions that the Government should raise the corporate tax rate, which is currently at a headline 22 percent for companies with a turnover of over KRW20bn to 25 percent. Deputy Prime Minister and Minister of Strategy and Finance Choi Kyung-hwan has rejected this, particularly as the global trend is for rate reductions, not increases. However, the damage may have already been done by the mere suggestion that the Government is considering a corporate tax hike, and investors might now be more inclined to sit on the sidelines and see how things pan out, rather than commit resources to South Korea.
    Source: http://www.tax-news.com/news/South_Korea_Approves_Supplementary_Budget____68743.html


  • Jul 11, 2013   Korea, South: cozy up to the dragon

    While favorite son Hong Kong powers ahead with reinventing itself as a regional financial hub, Mother China shows its true intentions by energetically pursuing trade deals which would have been unthinkable a decade ago. Last week good progress was said to have been made in FTA negotiations with arch-rival South Korea; and as a follow-up to the Economic Cooperation Framework Agreement between Taiwan and Mainland China, the two sides have now also concluded a long-awaited cross-strait agreement for trade in services. Taiwanese Premier Jiang Yi-huah said he looked forward to it providing a further impetus to closer business relations with the Mainland, and leading to further agreements on, for example, dispute settlement and double taxation, while also underlining Taiwan's commitment to trade liberalization and for it to take part in the on-going regional economic integration through more, what he called, "free trade agreements." Taiwan is to open up 64 sectors to mainland China, including banking, insurance, health services, securities broking, technical certification and analysis, and tourism. In like manner, the Mainland is to lower the threshold for market access to Taiwan investment in 80 sectors covering banking, insurance, securities broking, e-commerce, technical certification and analysis, and transportation. Fraternization between China and Taiwan, welcome as it is, can be seen as a part of domestic politics; but if China really means to strike a trade deal with South Korea (which would one day surely include North Korea), then this really is a signal of opening-up on a par with China's WTO membership. Add in Japan (also being talked about) and you are looking at an Asian single market to outclass the creaking, uncompetitive, introspective European single market.
    Source: www.lowtax.net/asp/story/front/China_South_Korea_Push_On_With_FTA____61309.html


  • May 30, 2013   Korea, South: trades on

    Mrs Park seems to have gotten off to a good start since her party's unexpected return to power, and trade is not the least of the dossiers which is receiving rapid attention, with her deputy announcing this week that South Korea will resume trade talks with Russia, suspended in 2008. Other trade-related developments recently have included the country's participation in a recent meeting of The Association of Southeast Asian Nations (ASEAN) member states in Brunei to start detailed negotiations on the Regional Comprehensive Economic Partnership (RCEP), a free trade agreement with Turkey which went into effect at the beginning of the month, an early-May free trade agreement negotiating round, the fifth, with China in Harbin (China), and, in April, in Seoul, a 3-day meeting between China, Japan and South Korea which encompassed the first round of negotiations on a proposed trilateral free trade agreement, and which were said to have been successful. Given the success of KORUS (the South Korea/US free trade agreement) and the country's FTA with the European Union, it may be fair to rank South Korea alongside Canada in the top rank of free traders.
    Source: www.lowtax.net/asp/story/front/South_Korea_Seeks_To_Resume_FTA_Talks_With_Russia____60835.html


  • May 16, 2013   Korea, South: starting-up

    North Korea has joined the ranks of countries supporting SMEs with tax incentives. Well, that woke you up, didn't it? If only it was true. Are there SMEs in North Korea? There certainly are lots of them in South Korea, and the country says it will significantly enhance the tax environment for start-ups. Generally speaking, Treasury ministers are very unimaginative, or rather, perhaps their officials are. When you think about it, you have to wonder how a senior finance ministry official would have any true understanding of the mindset of a person starting a business or thinking about doing that. Everything about their training and their priorities militates against such understanding. And, vice versa, everything about the mindset of a start-up entrepreneur militates against their having any understanding of how their new company could benefit from involvement on the part of the State. In most countries, to begin with, there are bureaucratic hurdles to jump before you can even begin to trade: licences, permits, you name it. From the start, the State is an enemy. Then, because everyone you deal with has already been taught to stay well away from the State, they all want to be paid in cash, and they want to pay you in cash. So, right from the beginning, you fall into the self-fulfilling Treasury prophecy that any entrepreneur is a crook in waiting. And of course if you want an employee . . . well, I need not go on. By and large, Governments, even the worst of them, cannot but be aware that start-ups are where the jobs come from; yet even the South Koreas are not brave or insightful enough to lay down a red carpet for people who want to risk their all on a new business. Let them do what they want for the first three years, with no consideration of tax of any description, for them or their employees, and then have a reckoning: give them a bonus for every employee, and pay them 10 percent of their profits as a kind of negative income tax. And only then start subjecting them to things like VAT, corporate income tax, payroll withholding and property tax. Instead of that, in most countries you have to fight to be allowed to run a business. It's crazy.
    Source: www.lowtax.net/asp/story/front/South_Korea_To_Provide_Tax_Incentives_For_StartUps____60706.html


  • Apr 04, 2013   Korea, South: planning a communal rice bowl

    How seriously should we take the free trade agreement negotiations between China, Japan and South Korea? Stick two pins in a map of the world, and you'll probably find that the two countries concerned are involved in one or more trade agreements, either in place or being negotiated. There are only a few hold-outs from the secular process of minimizing or abolishing cross-border obstacles to free trade; North Korea springs to mind. The WTO has 159 members and there are 24 countries in the waiting room (observer status), while the United Nations has 193 members, leaving only ten nations which aren't aspiring to belong to both. Then there is a bewildering number of regional trade groupings, amongst which the EU, NAFTA, MERCOSUR, ASEAN and CARICOM are obvious examples; but there are lots of others. Recently the Trans-Pacific Partnership (TPP) has been in the news; Japan has applied to join it, but neither China nor South Korea has yet applied to join. None of the three countries is a full member of ASEAN, but in "ASEAN + 3" the "3" are China, Japana and South Korea. All three are members of the WTO, of course. All three are also members of APEC, whose members are negotiating the FTAAP (Free Trade Agreement of Asia Pacific); at least they look as if they are, but there may be more heat than light. South Korea has free trade agreements with a number of major countries, most famously with the USA (KORUS) and the EU; one with Canada is under negotiation. Japan's negotiations with Australia for an FTA have been dragging on since 2007; but just last week Japan opened negotiations with the EU for an FTA. China meanwhile has FTAs with a scattering of smaller nations including New Zealand, and has an FTA with ASEAN. Ten years ago, apart from WTO involvements, none of our three countries seemed that interested in pursuing more thorough-going trade agreements; but based on their recent behaviour you have to allow that they have apparently changed their spots, and are giving at least lip-service to the idea of extensive free trade, even in so-called "sensitive" areas like agriculture. Are they serious? Japan's import tariff on rice is – wait for it – 778%!
    Source: www.lowtax.net/asp/story/front/China_South_Korea_Japan_Make_Tripartite_FTA_Progress____60276.html


  • Dec 31, 2012   Korea, South: makes a good choice

    And another star to South Korea, for electing a president, Park Guen-Hye, who says she will not impose new taxes and will pay for expanded welfare programs by cutting general government expenditure. It seems that I keep awarding stars to South Korea, but it's not favouritism, it's simply that the country has made a number of good choices during 2012 and is generally very business-friendly, despite occasional lapses like the Lone Star affair. It will be interesting to see whether Park has the good sense to bury that hatchet.
    Source: http://www.tax-news.com/news/South_Koreas_New_President_Has_No_Plans_For_Tax_Increases____58917.html


  • Dec 06, 2012   Korea, South: in unwelcome glare of publicity

    Moving sideways (or up or down - geography is not my strong suit) takes us to South Korea and another blast from the past in the shape of Lone Star. I thought that was done and dusted aeons ago, but apparently not. The South Korean government and Lone Star are still at each other's throats over the profits the company made from its investments in South Korea (Korea, everyone is starting to call it, as if the northern half didn't exist any more). I can't set myself up to judge the rights and wrongs of the matter, but I am clear that, as in the case of Vodaphone and India, a government is very badly advised to turn a major investor into a cause célèbre, with incalculable consequences in terms of reputation. Surely the game is not worth the candle?
    Source: http://www.lowtax.net/asp/story/front/Lone_Star_Files_Claim_Against_South_Korea____58440.html


  • Nov 29, 2012   Korea, South: will encircle the North

    As suggested in our news round-up, the FTA negotiations just starting between China, Japan and South Korea can be seen as a riposte to the American-led Trans-Pacific Partnership; but hey!, there are no bad FTAs, and this competition, if that is what it is, creates a virtuous circle of progress towards a tariff-free region. The TPP already has whiskers: originally (2005) it was a local affair between New Zealand and some of its Pacific neighbours, but for the last five years it has been much grander. China is staying aloof from the TPP, but South Korea is joining the fun, and Japan has said it wants to take part as well. But the TPP has just held its fifteenth round of negotiations, and the bigger it gets the further off seems any outcome. A touch of the Dohas, you might say. Perhaps the Japanese are just being cunning and are intent on spoiling the party? But when you look at how long it took the US Congress to ratify KORUS they probably needn't worry. The tripartite grouping is more real though: South Korea has some of the best free-trade credentials around, and will drive the negotiations hard. The sticking point will surely be the Japanese agricultural lobby? Presumably they have thought of that, so you have to assume that they are aiming for a limited agreement covering a number of industrial and perhaps financial sectors, with agriculture, fishing and other 'sensitive' sectors to follow along later. Fishing, gulp: they'll have to sort out the Spratlys and the rest before there's much chance of ratification in the Diet. It's trade that drives progress in human affairs, you see. If South Korea and China encircle North Korea in trade terms, how long could even that rogue state hold out in its ruinous anti-capitalist obsession?
    Source: http://www.lowtax.net/asp/story/front/China_Japan_South_Korea_To_Start_Trilateral_FTA_Talks____58395.html


  • Oct 25, 2012   Korea, South: but don't ask about the rice

    The Korean import tariff on popcorn is 630%. And that's South Korea, in case you were wondering. In North Korea it's probably classified as a WMD. Mind you, under the Korea/EU FTA it's going to be reduced to nothing (subject to ASG, whatever that means) over a mere seven years (it's 14 years under KORUS, so EU popcorn exporters - probably expatriate Chinese in Brick Lane - should be thankful for small mercies).
    Source: http://www.lowtax.net/asp/story/front/Positive_Review_Of_South_KoreaEU_FTA_After_One_Year____57857.html


  • Aug 09, 2012   Korea, South: burnishes its free trade credentials

    It's good that Vietnam is dishing out some tax exemptions and reductions, and quite rightly these are mostly directed at SMEs. It's lucky for small Vietnamese that they're not in the EU, where such largesse would of course be banned as illegitimate State Aid. ASEAN hasn't yet developed the powers and excrescenses that litter the sidewalks of Brussels, and let's hope it never does, although I'm perfectly certain that, as I write, in some back room at the egalitarian OECD, a bearded (male) economist is drawing up rules to prohibit all discriminatory incentives to SMEs. ASEAN itself is still mostly a pro-trade organization (like the EU before it got carried away with Delorsian delusions of empire) and Vietnam is building on the existing trading treaty by negotiating an FTA with South Korea, another member, which therefore receives the week's second encomium.
    Source: http://www.lowtax.net/asp/story/front/South_Korea_Vietnam_Agree_To_Launch_FTA_Talks____56697.html


  • Jul 19, 2012   Korea, South: loves trade

    South Korea is rivalling Canada as a star in the firmament of free trade. Having dragged the USA and the EU kicking and screaming to the free trade altar, South Korea is now plunging ahead towards CEPA-like deals with ASEAN members. There was a rocky moment during the negotiation with the USA, when it briefly seemed that the opposition would win an election and blow out the deal, but the electors were sensible and returned the pro-business Grand Union Party to power. Of course we would all prefer the Doha Round (wouldn't we?) but while it lumbers laboriously on, CEPAs are better than nothing. And something that is usually not noticed: FTAs and CEPAs often prescribe WTO dispute resolution. Maybe that is the multilateral future for global trading: CEPAs with parallel WTO adjudication.
    Source: http://www.lowtax.net/asp/story/front/South_Korea_Pursues_Further_FTAs_Within_ASEAN____56398.html


  • Jun 15, 2012   Korea, South: Three cheers for the KORUS

    Not quite sure what a KORUS would be if you met one on a dark night; perhaps it would be cuddly and live in a tree in Australia. As I'm sure you know, our KORUS is the Korea/USA free trade agreement, which has already had more lives than a cat, being given up for dead umpteen times courtesy of the opposition in the USA (does the Democrat party count as opposition? at least it was for most of KORUS's nine lives) and in Korea, where only an unexpected miracle in the shape of the re-election of the Grand National Party last April saved the young KORUS from certain death. So, full credit to both countries for having persisted against heavy odds, bringing the promising animal to life. It will do more good than any cat ever did. Sorry, Mehitabel. And yes my name is Kitty.
    Source: http://www.lowtax.net/asp/story/front/South_Korea_US_Conclude_First_Review_Of_KORUS_FTA____55860.html



 

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