South Korea’s conglomerates running subsidiaries in foreign countries with corporate tax rate of less than 15 percent are expected to face extra tax burdens, following the historic agreement by the G7 on a global minimum corporate tax rate of 15 percent.
The G7 group of advanced economies agreed to set a global minimum corporate tax rate of 15 percent to prevent countries from competitively undercutting to attract multinational companies. The Ministry of Economy and Finance said that South Korea could be affected if members of the Organization of Economic Cooperation and Development (OECD) agree to follow suit at conference next month.
According to Rep. Yong Hye-in of the minor opposition Basic Income Party, the country’s 51 business groups have 473 subsidiaries last year in 22 countries designated as tax havens by the OECD. They have 146 in Singapore, 93 in Malaysia, 50 in the Philippines, 41 in Cayman Islands, 36 in Chile, 28 in Panama, 16 in Austria, 16 in Belgium, 12 in Switzerland, 10 in Luxemburg and 6 in Virgin Islands.
Samsung Group has the largest number of 59 entities in those jurisdictions levying a corporate tax of less than 15 percent on multinational companies, followed by SK with 57, LG 34, CJ 33 and Hyundai Motor 25. If they are based in Korea, they must report the difference to the Korean government.
The global agreement on minimum corporate tax rate however won’t raise the country’s levy on corporate income as it the country already levies far higher income tax on companies - maximum 27.5 percent in corporate tax including local taxes and 19.1 percent of effective tax rate..
By Yang Yeon-ho and Choi Mira
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]