Income levies for richest individuals and companies will go up next year by as much as 5 trillion won ($4.6 billion) under the revised tax code agreed by the ruling and opposition party.

The floor leaders of the ruling Democratic Party, the opposition Liberty Korea Party and People’s Party on Monday reached an agreement on a tax code overhaul that raises the top-bracket corporate tax rate to 25 percent from current 22 percent for businesses with annual taxable income of more than 300 billion won ($276 million), up from current 200 billion won.

According to the Ministry of Strategy and Finance, 77 companies will have to pay extra 2.3 trillion won in income taxes next year.

Maximum tax deductions for large companies in their R&D spending will go down from 3 percent to 2 percent and tax benefit for their facility investment also will be eased to 1 percent from 3 percent. The scale-down in tax breaks for large companies will increase their annual levies by another 550 billion won.

Contrary to sharp cuts in corporate tax rates in the United States and Japan to keep companies invest and hire on home turf, the government under liberal President Moon Jae-in pursues increased welfare through redistribution and pro-labor policy to help spur spending and growth through secured jobs and income.

The parties also reached a deal to bump up the top-bracket tax rate for people with annual income of more than 500 million won to 42 percent from current 40 percent. They also agreed to change the tax code that currently levies 38 percent tax rate on those making between 150 million won and 500 million won a year by breaking up into separate sections that impose 38 percent tax on those earning between 150 million won and 300 million won and 40 percent on those making between 300 million won and 500 million won. The revision can increase tax bills up to 1.08 trillion won for 93,000 individuals.

Additionally, the levy for stock transfer tax rate for largest shareholders would increase to 25 percent from current 20 percent, imposing 300 billion won more taxes for the stock-rich.

By Yoon Won-sup and Choi Mira

[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]