Seoul argues for lowering tax base for digital tax, minimum tax rate of 15%

2021.10.07 15:29:58

[Graphics by Song Ji-yoon]이미지 확대

[Graphics by Song Ji-yoon]

The Korean government has made it clear that the standard tax base for manufacturers should be sufficiently lowered even if the global digital tax plan is passed and a minimum tax rate is introduced worldwide.

The proposal is part of the government’s basic approach to the digital tax, which was delivered by Yoon Tae-sik, Deputy Director at Ministry of Strategy and Finance during the OECD Ministerial Council Meeting held in Paris, the finance ministry said on Thursday.

During the OECD’s highest-level forum, the Korean government demanded the creation of a specific substance based carve out to raise the tax credit rate for manufacturers. It argued for 15 percent minimum rate for Korean exporter, according to the ministry.

The government also proposed that the digital service tax (DST) in individual countries should be abolished, and other similar taxes should be banned when the digital tax takes into effect.

Earlier, the OECD Inclusive Framework on Base Erosion and Profit Shifting (IF) committed to fundamental changes to the international corporate tax system released detailed blueprints of its Pillars 1 and 2 proposals agreed by 130 countries of its 139 members.

The Pillar I digital tax is to ensure that multinationals with global annual turnover above 20 billion euros (27 trillion won) and operating margins of over 10 percent pay taxes in all the countries where they provide services and earn profit, not just in their home countries. Samsung Electronics and SK hynix would be subject to Pillar I.

The Pillar II digital tax, a minimum 15 percent global corporate tax rule, would additionally apply to MNCs with consolidated sales of over 1.1 trillion won.

By Minu Kim

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