Tax cut for corporations and fewer regulations are Yoon's economic recipe
South Korea’s new president has presented his reforms to revive growth, held back by the global economy. Moon’s solidarity provisions on the country’s 100 largest corporations will be scrapped. The legal limit of 52-hour working week could also be revised. But all measures will go before a parliament where the conservatives People Power Party does not have a majority.
Seoul (AsiaNews) – No one doubted that South Korean President Yoon Suk-yeol’s economic programme was conservative. When he ran for office, the right-wing politician laid out his vision of a private-sector driven economy, promising voters freer markets and less government intervention, albeit South Korean style.
Now Yoon has made public his plans to reform the economy and revive growth, which is estimated to be the lowest in the past three years.
With supply chain disruptions, soaring inflation and rising interest rates, the growth forecasts for the country’s economy in 2022 was scaled back from 3.1 per cent to 2.6 per cent.
“Our economy and markets are being shaken as we are thrown into a complex crisis amid fears of stagflation," said Yoon today noting that his reforms are a response to the turbulence of the world economy.
Citing his programme, he added that, “We will make bold moves to remove any regulations that hampers corporate competitiveness and entrepreneur spirit”.
What has attracted the most attention is the proposal to lower the top corporate tax. The rate on about 100 of the largest companies was raised to 25 per cent in 2018, when the former progressive government increased it to pay for more social welfare.
Now Yoon, in his attempt to dismantle the political legacy of the Moon Jae-in administration, wants to review that decision and bring the tax back to 22 per cent.
Yoon's plan is aimed at giving companies a central role in reviving growth, while providing them with the means to achieve that goal.
His proposals include substantial deregulation; for example, one proposal would see the legal limit of the 52-hour working week revised; another would cut the number of companies subjected to the inheritance tax.
Financially, South Korea’s new right-wing government wants to suspend taxes on capital gains for small investors to allow publicly traded companies to raise new funds.
In addition, the government wants to support start-ups by expanding the tax exemption on stock options, to enable them to more easily hire the best talent.
The government also plans to reform the pension system and the public sector in the coming months.
The South Korean economy operates differently from the classic Anglo-American neoliberal model, a difference accepted by the country’s right-wing camp.
In fact, South Korea’s conservatives want more tax cuts for strategic investments in semiconductors and new generation OLED screens, incentives for companies that delocalised to come back, and public support for the infrastructure needed to develop new technologies.
Yoon promised business associations that he would create a more business-friendly environment, which is basically what big South Korean companies expect.
For now however, the proposed reforms remain a wish list, since the president’s party, the People Power Party, does not have a majority in parliament. Only time will tell which and whether the president’s promises will be fulfilled or not.
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