In connection with the "Domestic Production Promotion Tax System (Korean-style IRA)" the government is pursuing, it is also reviewing a plan to provide direct subsidies to strategic industry corporations that are running deficits. The judgment is that the existing support system centered on tax credit has limitations in supporting corporations at the initial investment stage.
Koo Yun-cheol, Deputy Prime Minister and Minister of the Ministry of Economy and Finance, said at the "K-shipbuilding future vision roundtable" held at Lahan Hotel Ulsan on the 13th, "The Domestic Production Promotion Tax System is limited in its effectiveness for corporations that do not generate profits at an early stage," and "We are also discussing subsidy support methods with the Ministry of Planning and Budget."
The Domestic Production Promotion Tax System is a system that provides tax credit benefits in line with corporations' domestic production volume, similar to the U.S. Inflation Reduction Act (IRA). However, steady criticism has been raised that corporations running deficits have little or no corporate tax burden itself, making it difficult to feel the effect of tax support.
Accordingly, the government is inclined to review a "two-track" support system that combines tax credit and direct fiscal support. In the industry, sectors that require large-scale front-loaded investment—such as batteries, solar, and shipbuilding equipment—are being mentioned as the main beneficiaries.
The government plans to include detailed provisions of the Domestic Production Promotion Tax System in the tax law amendment to be announced in Jul. Major countries such as the United States and Japan are combining tax incentives and subsidies to induce expansion of domestic production, and in Korea as well, policy responses aimed at supply chain stability and securing manufacturing competitiveness are taking shape in earnest.
At the roundtable, additional measures to support the shipbuilding industry were also discussed. The president mentioned the need to expand demonstration projects to localize technology for liquefied natural gas (LNG) carrier cargo holds, and instructed officials to review policy finance and fiscal support to resolve the shortage of refund guarantees (RG) for advance payments at mid-sized shipbuilders.
Kim Jung-kwan, Minister of the Ministry of Trade, Industry and Resources, said, "The three shipbuilders plan to hire more than 20% more new in-house employees this year than last year," and "We will also encourage broader sharing of performance between prime contractors and subcontractors."