The 'revitalization of the local economy', a core national policy goal of the Lee Jae-myung government, is also included in this year's tax reform plan. To stimulate the local economy, the government has decided to expand tax support for corporations that transfer their headquarters or factories to local areas.
However, it has been confirmed that there are no local governments in the entire country that correspond to the areas where tax benefits have been the most increased. With doubts about the effectiveness of tax support to promote local transfers continuously raised, there are calls to revise the government's tax support structure.
On the 31st, the government held a Tax Development Advisory Committee meeting and finalized the 2025 tax reform plan. The Ministry of Economy and Finance stated it would extend the corporate tax reduction period for corporations relocating to local areas from 7-12 years to 8-15 years, depending on the relocation area.
The Ministry of Economy and Finance noted that it aims to strengthen incentives for corporations to transfer to depopulated areas and induce active investment and job expansion.
The tax support system for corporations transferring to local areas is largely divided into 'general areas' and 'underdeveloped areas.' Underdeveloped areas refer to local governments designated as depopulated areas, growth promotion areas, or employment and industrial crisis areas.
The government has classified regional areas into five categories: the metropolitan area, adjacent regions to the metropolitan area, local metropolitan cities, medium-sized cities, and others. The scale of tax support varies depending on whether these regions are classified as 'general areas' or 'underdeveloped areas.'
First of all, no tax support will be provided to corporations located in general areas in the metropolitan region. However, for underdeveloped areas such as Ganghwa and Ongjin in Incheon, Gapyeong, and Yeoncheon, corporate tax burdens will be fully exempted for five years, followed by a 50% reduction for the next three years. This extends the current 100% exemption for five years and 50% reduction for two years by an additional year for the 50% reduction.
The area where benefits are increasing the most is the underdeveloped regions of medium-sized cities. This area currently receives tax support consisting of a 100% exemption for seven years and a 50% reduction for three years. The government stated it would provide 'a 100% exemption for 10 years and a 50% reduction for 5 years' for this area through the recent tax reform.
The issue is that there are no local governments across the country that fit this category. According to current laws, eight medium-sized cities designated are Gumi, Gimhae, Jeonju, Jeju, Jinju, Changwon, Cheongju, and Pohang. These local governments are core hub cities in the region and do not correspond to categories such as 'depopulated areas.'
In response, a Ministry of Economy and Finance official stated, "Currently, there are no local governments that fit this category," while also explaining that "there is a possibility that in the future, the regional classification system will be revised, leading to the division of medium-sized cities into smaller units or the integration of new local governments into medium-sized cities."
Some point out that extending the 50% reduction period for other categories by about a year is merely a superficial measure, particularly when significant tax support has only been increased for underdeveloped areas of medium-sized cities that have no corresponding local governments, arguing it is more about creating the appearance of 'actively assisting local transfers.'
Regarding tax support for corporations relocating to local areas, reactions from the corporate sector are also lukewarm. A corporate official remarked, "The main reason corporations are hesitant to relocate is due to difficulties in attracting talent," adding, "Recently, there has been significant internal backlash regarding the Ministry of Oceans and Fisheries' transfer to Busan. Even public officials are vehemently opposing the move to transfer to a regional metropolis like Busan, so conditions for private corporations are even tougher. Particularly, talented individuals are unlikely to seek employment in companies that have moved to underdeveloped areas."
In this regard, Park Geum-cheol, the head of the Tax Division at the Ministry of Economy and Finance, stated, "Simply providing tax support won't suffice for corporations to move their operating bases," while expressing hope that "there might be a slight easing of that decision. We have given considerable thought to expanding tax support."