New Korean gov’t to relax regulations, tax rules for private sector-led growth

2022.05.04 10:56:31 | 2022.05.04 10:57:08

[Photo by Lee Seung-hwan]이미지 확대

[Photo by Lee Seung-hwan]

The incoming South Korean government under Yoon Suk-yeol will significantly relax regulations and offer businesses generous tax benefits to promote the private sector-led growth and reform trade policies to cope with growing threats from weaponized economic activities by bigger economies.

According to a list of 110 administrative agenda announced by President-elect Yoon’s transition team on Tuesday, the new head of state will preside over newly created regulatory and industry innovation strategy meetings to facilitate the growth of more innovative businesses in the country.

This is part of the Yoon administration’s efforts to drive Asia’s fourth largest economy’s growth through the private sector. To facilitate business activities, the new government will form a regulatory innovation promotion group consisting officials from the private and public sectors and academia to examine various regulations and suggest measures to improve them.

It will also expand and reform the current regulatory sandbox system to make it easier to create an innovative ecosystem for new industries. It will also promote citizens and businesses to actively suggest regulatory improvement through a newly created government system.

The Yoon government will also seek to adopt a negative regulatory system that ensures all things acceptable except those specifically banned by the government. This is considered better than the country’s current positive regulatory system in promoting creative innovations in business.

Tax relation is another perk for private businesses. The new government will expand tax support to spur businesses to invest and hire in Korea and reshoring. It plans to slash taxes on reserve income dividends to encourage businesses to spend reserve income on investment.

It will also give businesses in digital and low-carbon industries tax benefits for their research and development (R&D). Korean companies moving their manufacturing sites from overseas back home will enjoy income tax and corporate tax reduction.

The president-elect will also lower barriers for business succession tax deduction system and special system on family business succession gift tax for smooth transfer of innovative technologies and capital between generations.

Policy finance under the new government will focus on future core technologies and sectors that need large-scale funding such as carbon neutrality. The government will also roll up its sleeves to boost R&D on advanced industries such as chips and batteries, vaccines, displays, and hydrogen energy and offer tax benefits. M&As will become easier under the incoming government that will introduce a fast-track review system for M&As.

At a time when big economies tend to weaponize their resources and trade to influence rivals, the new government will set up a new security committee under Prime Minister consisting experts and related ministry officials to maximize national interest in strategic technology and supply sectors highly competitive among major economies. The Yoon government plans to establish a response system integrated with expertise of diverse sectors and enhance national security system, said an unnamed official from the transition committee.

By Lee Jong-hyuk, Song Min-geun, and Lee Eun-joo

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