Posted on 11 Mar 2008
In its first report to President Lee Myung-bak who took
office on Feb. 25, the Ministry of Strategy and Finance said that easing
government red tape and tax burdens will take top priority.
The government plans to cut corporate taxes across the board
as early as the second half of this year.
"Corporate tax rates that stand at 25 percent for large
companies and 13 percent for smaller-sized firms will be downgraded to 22
percent and 11 percent next year, and eventually fall to 20 percent and 10
percent each in 2013" said Yim Jong-yong, head of the ministry’s economic
policy bureau.
He said while plans call for change next year, depending on
changes that can be passed by lawmakers after June, the process can be speeded
up.
The official also said the minimum tax rate for all businesses
will be downgraded to 8 percent in 2009 from 10 percent at present.
Such steps are expected to cause state revenue to dip 8.6
trillion won ($8.9 billion), but could help domestic investment move up 2.8
percent, which could help create 40,000 new jobs, the official said.
Other policy targets spelled out in the report call for
stepped-up efforts to keep inflation at 3.3 percent this year, within the
3.0-3.5 percent range set by the nation’s central bank.
This is higher than the annual gain of 2.5 percent tallied
for last year.
The economic growth target for this year is higher than the
4.8 percent set by the ministry earlier this year. The number of projected new
jobs for this year is higher than 280,000 created last year but lower than the
president’s campaign pledge of 600,000.
The country may post a current account deficit reaching $US7
billion this year from a surplus of 5.9 billion in 2007.
Weighed down by galloping energy and raw material prices,
most domestic and foreign economic experts are increasingly pessimistic about
the outlook for the South Korean economy this year, with some even predicting
that the growth rate may tumble to the 3-percent range.
The Korean economy,
Yim then said that while President Lee pledged to push up
growth to the 7 percent range for his five-year term in office, the actual goal
of this administration is to strengthen the economy so 7 percent growth can be
reached down the road.
He said by removing red tape and streamlining operations
like reducing the number of state employees,
The macro-economic measures are mainly aimed at easing
uncertainties posed at home and abroad.
In addition to outright tax cuts, the ministry said that it
will expand tax deductions for investment made in research and development from
7 percent of the total to 10 percent, and allocate more money so regional
government can carry out measures needed to revive the economy.
The ministry already said it will do away with equity
investment limits imposed on large companies with assets exceeding 2 trillion
won by June and ease regulation on setting up holding companies particularly to
requirements for debt ratio.
State-run companies are to invest 40.3 trillion won this
year in social overhead capital projects as a way to further revive the
economy.
Despite such efforts experts said that pushing up growth to
6 percent may not be attainable this year with the
"The stock market, hiring, interest rates and overall
economic conditions are not conducive to growth," said Hwang In-Seong, a
researcher at Samsung Economic Research Institute said.
He said that judging just by overall trends, the economy may
start losing steam after the first quarter.
This view was supported by other think tanks that said weak
domestic spending caused by unfavorable balance of trade conditions could sap
growth.
