An analysis by the National Assembly Budget Office showed that the revenue loss from the corporate tax cut by the Yoon Suk-yeol government last year was only 3 trillion won. Of the total corporate tax revenue loss of 18 trillion won last year, the effect of the tax rate reduction was found to be not significant. The logic of the Lee Jae-myung government, which is pushing to restore the corporate tax for the sake of securing revenue, has become weak.
According to materials received on the 'Revenue increase and decrease from corporate tax rate amendment' requested by Kwon Young-se, a member of the People Power Party's Strategy and Finance Committee on the 20th, the revenue loss from the corporate tax cut of 1 percentage point in 2022 during the Yoon Suk-yeol government was analyzed to be 3 trillion won for 2024 (attributed to 2023).
The Budget Office calculated the change in taxable income per corporation before and after the tax law amendment by multiplying the difference in the estimated tax amount by the number of reporting corporations within each taxable income bracket. There are four corporate tax brackets. There are 353,079 corporations in the bracket of 200 million won or less, 120,147 in the bracket of 200 million won to 20 billion won, 1,681 in the bracket of 20 billion won to 300 billion won, and 94 corporations in the bracket over 300 billion won. The Yoon Suk-yeol government lowered the corporate tax rate by 1 percentage point across all tax brackets through the tax law amendment in 2022.
The Budget Office estimated that there was a revenue decrease of 3 trillion won last year due to the corporate tax cut. The decrease was estimated to be 200 billion won in the bracket of 200 million won or less, 1 trillion won in the bracket of 200 million won to 20 billion won, 1 trillion won in the bracket of 20 billion won to 300 billion won, and 800 billion won in the bracket over 300 billion won.
Looking at the changes in corporate tax revenue by year, it decreased by 17.9 trillion won from 80.4 trillion won in 2023 to 62.5 trillion won in 2024. The Ministry of Economy and Finance included a 1 percentage point increase in corporate tax rates to secure revenue when announcing the first tax reform plan of the Lee Jae-myung government. Deputy Prime Minister and Minister of Economy and Finance Koo Yoon-cheol noted during last month's confirmation hearing that 'the previous government weakened the revenue base due to economic slowdown and corporate tax cuts,' and proclaimed the restoration of the corporate tax rate.
However, among the 17.9 trillion won decrease in corporate tax revenue, the actual decrease caused by the corporate tax cut was only 3 trillion won, which weakened the Ministry of Economy and Finance's logic. The main factors of the revenue decrease were the decrease in corporate performance due to the economic slowdown. In fact, there are also arguments that raising corporate taxes during difficult economic times may stifle corporate activity and cause greater damage to the economy.
The effect of increased corporate tax revenue from raising corporate tax rates also appears to be limited. The Budget Office estimated that the revenue increase effect from the corporate tax increase during the Moon Jae-in government in 2017 was 3.3 trillion won. The Moon Jae-in government raised the corporate tax rate in the bracket of taxable income over 300 billion won from 22% to 25% at that time.
This result shows that neither increasing nor decreasing corporate taxes has a significant effect on revenue fluctuations. Experts also make similar observations. Professor Kim Woo-cheol from the Department of Taxation at the University of Seoul stated that when the top corporate tax rate is raised by 1 percentage point, the expected revenue increase is around 2.4 trillion won.
Kwon Young-se said, 'The political logic of tax cuts for the wealthy and tax normalization is only holding back corporations that are normally experiencing difficulties due to uncertainty,' and added, 'Along with the Yellow Envelope Law and the amendment of the Commercial Act, the Lee Jae-myung government's slogan that 'corporations are truly the center of growth' has become meaningless.'