The government is set to revive tax amendment tasks that evaporated amid the Dec. 3 martial law situation and the impeachment political climate. These include the 'K-Chips Law' to support the semiconductor industry, along with bills related to inheritance, gift tax, and the individual savings account (ISA). The aim is to select issues, at least those that have found some agreement between the ruling and opposition parties, as alternatives and pass them through an extraordinary session of the National Assembly early next year.
However, since follow-up conflicts post-impeachment and internal strife within the ruling party need to be resolved before related discussions can begin, it is assessed that the direction of these tax laws depends on the National Assembly. Fortunately, as the policy of the opposition party to prioritize urgent livelihood issues for legislative processing has recently taken shape, a favorable situation is being created for the government's promotion plans.
A Ministry of Strategy and Finance official said on the 23rd, "We are planning to gather the contents of the tax amendments that have reached some bipartisan agreement up to the subcommittee stage of the National Assembly's Strategy and Finance Committee (Strategy and Finance Committee) tax subcommittee and push for their passage when the extraordinary session of the National Assembly convenes early next year."
Previously, the National Assembly passed the '2025 budget plan' unilaterally by the opposition party on the 10th. At the same time, 'Revenue Accompanying Bill,' which needs to be processed in line with the budget plan due to significant changes in next year's revenue, was also unilaterally passed by the opposition party. All tax amendment issues that the ruling and opposition parties and the government had reached a tentative agreement on were completely removed.
The most notable is the national strategic technology tax credit, also known as the 'K-Chips Law' (Special Taxation Restriction Act). Semiconductors have been designated as a national strategic technology. A 15% facility investment tax credit is applied to large and medium-sized corporations, and a 25% credit is applied to small and medium enterprises (SME). The ruling and opposition parties have once agreed to increase this tax credit rate for semiconductors by 5 percentage points (p) from the current rate.
The same goes for the temporary investment tax credit. The temporary investment tax credit is a system that provides an additional 10%p credit on the increase when a corporation invests more than the average amount invested over the previous three years. Although it was decided to extend this system, which is set to sunset at the end of this year, for two more years and to apply it only to small and medium-sized corporations, it did not make it to the plenary session.
There is still room for discussion regarding the individual savings account (ISA) tax support (Special Taxation Restriction Act). ISA allows investment in various financial products such as stocks, funds, and bonds with tax-saving effects. Depending on the investment amount upon joining, dividends and interest income are 'tax-exempt.' The government aimed to expand these tax exemption limits and contribution limits. An opposition party official said, "There is a consensus to some extent on expanding ISA tax support," and "We need to revisit what needs to be finally agreed upon."
Although there is no agreement between the ruling and opposition parties on the inheritance and gift tax, the government is strongly committed to revising this policy. The government pushed to amend the law, focusing on reducing the maximum inheritance tax rate from 50% to 40%, but it was rejected in the plenary session and 'scrapped.' Prime Minister Han Deok-su expressed on the 16th, "The government will resubmit the inheritance and gift tax bill containing the relaxation details to the National Assembly and strive for its swift passage."
Unlike other tax amendment tasks still pending in standing committees, the inheritance and gift tax need to be newly proposed. Looking at the situation where the ruling and opposition parties have negotiated, the Democratic Party initially opposed lowering the top inheritance tax rate but indicated some room for negotiation to expand the inheritance tax child deduction (currently 50 million won per person).
However, for these initiatives to proceed, the situation in the National Assembly must be supportive. The ruling party is currently unable to properly negotiate policies due to internal turmoil. Tax amendment discussions have been pushed down in priority compared to other issues. Furthermore, given that Lee Jae-myung, leader of the Democratic Party, has demanded the formulation of a supplementary budget, it is anticipated that tax discussions might commence based on how agreements on the supplementary budget are reached.
The National Assembly is also aware of this situation. Song Eon-suk, chair of the Strategy and Finance Committee from the People's Power party, mentioned at the Strategy and Finance Committee plenary meeting on the 17th, "I'm aware that the Special Taxation Restriction Act, agreed upon by the ruling and opposition parties regarding taxes, has not made it to the plenary session and remains in the Strategy and Finance Committee," and urged, "The ruling and opposition secretaries should quickly negotiate." The opposition party also shares the stance that livelihood-related bills without disputes should be processed swiftly. The Democratic Party has announced its policy to quickly process 86 livelihood economy bills, including the Commercial Act, Semiconductor Special Act, and Power Grid Expansion Act, currently under review by the National Assembly's standing committee.
The business community is also demanding a quick resolution of uncertainties regarding tax amendment issues that are not contentious between the ruling and opposition parties. Kim Ki-moon, chairman of the Korea Federation of Small and Medium Enterprises, one of Korea's four major economic groups, met with National Assembly Speaker Woo Won-sik on the 17th and said, "There are contents in the living bill tax amendment bill that have little disagreement between the ruling and opposition parties," and "If issues like extending the temporary investment tax credit or raising the income tax deduction for card usage in traditional markets are passed quickly, even one day earlier, it will be beneficial to small business owners or SMEs."