The government has decided not to include a "direct refund system," which the battery industry and others have been demanding, in this month's tax reform plan, according to reports on the 22nd. The battery industry and others say that if the domestic production promotion tax system is introduced, they could receive a partial corporate tax credit, but because they are in the red, a corporate tax credit is meaningless. They have therefore called for a direct refund system that would return cash equal to the amount of the tax credit.
According to ChosunBiz's reporting, the Ministry of Economy and Finance has decided not to include a direct refund system in connection with the domestic production promotion tax system in the tax reform plan to be announced at the end of this month.
The domestic production promotion tax system is one of President Lee Jae-myung's campaign pledges. It would allow corporations that produce and sell products in Korea using national strategic technologies such as batteries to deduct part of their production costs from corporate taxes. It could be introduced as early as next year, with benefits provided to corporations starting the year after next.
In response, the battery industry and others say that because they are in the red and have no corporate taxes to pay, corporate tax credits were never helpful in the first place.
Koo Yun-cheol, Deputy Prime Minister for the Economy and Minister of Economy and Finance, said at the "K-shipbuilding future vision roundtable" in May that support for loss-making corporations would be reviewed. Since then, measures such as a direct refund system have been discussed.
However, the introduction of a direct refund system faces a hurdle in that there is no precedent for returning cash to corporations equal to the amount of a tax credit. As a result, other options such as fiscal support and financial support are reportedly being reviewed.