Domestic small and medium-sized enterprises targeting the U.S. market are facing the dual challenges of tariff and corporate tax increases.
The U.S. is one of the major export markets for Korean small and medium-sized enterprises. There are forecasts that management activities are inevitably restricted due to the recent 15% tariff agreement and corporate tax increase.
According to the Small and Medium-Sized Enterprise Association on the 4th, domestic small corporations in the automotive parts, electrical and electronic, and medical device sectors have been expanding their supply chains in the U.S. market.
As of last year, the number of export small and medium-sized corporations was 95,905, making the U.S. the number one export market for small and medium-sized enterprises. However, analyses indicate that both corporations' revenue and investment capacity could shrink due to the agreement on the 15% tariff and the government's tax reform proposal.
U.S. President Donald Trump confirmed a 15% reciprocal tariff on Korea under the condition that Korea invests $350 billion (approximately 487 trillion won) in the U.S.
The government decided to raise the tax rates on four corporate tax brackets by 1 percentage point each. Specifically, the rates will increase as follows: ▲9% to 10% for income up to 200 million won, ▲19% to 20% for income between 200 million and 20 billion won, ▲21% to 22% for income between 20 billion and 300 billion won, and ▲24% to 25% for income exceeding 300 billion won.
The Ministry of Economy and Finance estimated that the burden on small and medium-sized enterprises from this year's tax law revisions will be approximately 6.5 trillion won out of the total increased tax revenue of 35.6 trillion won.
The automotive parts industry, which is heavily dependent on North America, is tense about external changes. There is a possibility that domestic automobile exports may decrease due to tariff impacts, which is expected to affect the automobile parts industry linked to finished vehicle exports.
The total export value of domestic automobile parts is $2.336 billion (approximately 3.47 trillion won). Among this, 34.1%, or $798 million (approximately 1.17 trillion won), was generated in the U.S.
A representative from a Gyeongnam automotive parts company said, 'The U.S. is imposing tariffs on other countries as well, so there might be room to observe more.' However, they added, 'It is true that the tax burden has increased when considering the rise in corporate tax rates and local income tax.'
They further noted, 'In the past, some companies did not pay corporate taxes last year due to losses; even if they turn to profits, the increased tax burden could constrain their investment capacity and cash flow.'
While the government has prepared measures to alleviate the burden on small and medium-sized enterprises, some evaluations suggest that these efforts may fall short.
To support export small and medium-sized enterprises affected by U.S. tariffs, the government is injecting 4.6 trillion won in policy funds and extending the 'special tax exemption for small and medium-sized enterprises' until 2028, which allows for certain percentage reductions in corporate and income taxes upon meeting specific criteria.
Mr. A, who runs a machinery and equipment corporation in Gyeonggi Province, stated, 'While extending the exemption period instead of raising corporate tax rates has resulted in a practical reduction in the burden, it is clear that the overall business environment has worsened.' He added, 'It wouldn't have been too late to decide on the corporate tax increase after observing how the industry responds following the tariff imposition.'
Professor Kim Woo-cheol from the University of Seoul noted, 'The impact on export small and medium-sized enterprises is significant.'
Professor Kim explained, 'Although a 1% increase is not substantial, the economy is facing difficulties, and small and medium-sized enterprises are in a situation where they lack cash and liquidity. Previously, they had advantages in terms of tariffs compared to the European Union and Japan, but with the Korea-U.S. tariff agreement, that advantage has disappeared, coupled with the increase in corporate taxes, leading to a structure where small and medium-sized enterprises cannot help but feel difficulties.'