Effective corporate tax rate falls under official rate, data shows
SEOUL-- The effective corporate tax rate for the country's largest companies fell below the official rate of 22 percent last year due to various adjustments, data from a conglomerate research firm showed Tuesday.
Chaebul.com analyzed 131 companies who earned over 200 billion won (US$179.37 million) in pre-tax profits and found their average corporate tax rate came to 18.9 percent after deductions.
The selected companies included 11 affiliates of Hyundai Motor Group, nine from Samsung Group, seven under SK, five LG firms, four Hanwha companies and three from GS.
According to the local business tracker, the companies earned 110.64 trillion won in profit before taxes and paid 20.91 trillion won in corporate taxes after 3.42 trillion won in deductions. Pre-tax profits represent a company's earnings after operating expenses, such as interest and depreciation, are excluded from revenue. Corporate taxes are levied based on pre-tax amounts.
Analysis showed that 72 companies paid above the current corporate tax rate while the 59 others paid less.
Samsung Electronics made the highest pre-tax earnings of 14.72 trillion won last year and paid 3.14 trillion won in taxes, an actual rate of 21.4 percent.
Hyundai Motor earned 4.94 trillion won and paid 841.4 billion won in taxes for a rate of 17 percent. Chipmaker SK hynix earned 2.96 trillion won and paid 306.7 billion won for a rate of 10.4 percent.
Holding companies tended to pay much less because affiliates bear most of the taxes. Companies under workouts or those that received capital injections from shareholders paid no taxes.
The Moon Jae-in administration is looking at increasing taxes on very big companies to fund its economic recovery policies, with suggestions that the rate be raised to 25 percent. Estimates based on Chaebul.com's analysis show that collected corporate taxes last year would have increased by 3.32 trillion won before deductions. The amount would be 2.8 trillion after write-offs.
"South Korea's corporate tax rate is 24 percent when including value-added taxes, but in case of the United States, the rate exceeds 30 percent," Chung Seon-sup, head of Chaebul.com, said. "Our corporate tax rate is lower than other countries. Raising the rate would be positive because it could increase donations and dividends."
Source: Yonhap News Agency