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| Deputy Prime Minister and Finance Minister Hong Nam-ki speaks at the G20 finance ministers’ meeting in Venice, Italy, July 10 (local time). Courtesy of Ministry of Economy and Finance |
Discussion to continue through October
By Lee Kyung-min
The government asked that a “digital tax” for local firms in Korea be set at 20 percent, the lowest rate possible within the range of between 20 percent and 30 percent agreed upon at the G20 finance ministers’ meeting, the country’s top policymaker said Sunday.
This is to reduce the burden for firms that are expected to pay soaring corporate taxes in accordance with an ongoing financial initiative pursued by the OECD and the G20 on countering base erosion and profit shifting (BEPS).
The OECD/G20 Inclusive Framework (IF) involving about 130 countries agreed that governments should be able to tax multinationals on profits generated in their countries.
They agreed that a digital tax will be imposed on multinational companies with annual sales exceeding 20 billion euros (27.2 trillion won) and profits higher than 10 percent.
The tax will be divided into two pillars. The first pillar states that the countries where the firms generate profit will be able to tax firms between 20 percent and 30 percent for profits exceeding 10 percent. The second pillar states that a corporate tax of at least 15 percent must be paid by businesses that have consolidated sales exceeding 750 million euros.
“Different opinions were exchanged about the range of 20 percent to 30 percent, and the Korean government made it clear that the rate should be 20 percent,” Deputy Prime Minister and Finance Minister Hong Nam-ki said in a meeting with reporters in Venice, Italy. “Discussions will continue for three months until October’s G20 meeting.”
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| Deputy Prime Minister and Finance Minister Hong Nam-ki, right, poses for a photo with International Monetary Fund Managing Director Kristalina Georgieva at the Venetian Arsenal in Venice, Italy, July 10. Courtesy of Ministry of Economy and Finance |
This was delivered to U.S. Treasury Secretary Janet Yellen who according to Hong said she understood Korea’s position.
Hong said he maintains intermediate goods should be exempt from digital taxation, an idea opposed by most countries.
As for the minimum corporate tax of 15 percent defined by pillar two, he said the scope of taxation will vary by country depending on the corporate revenues generated there. The tax rate will not be lowered to under 15 percent and some countries claim the rate should be raised.
The finance ministers’ meeting was the first face-to-face event in a year and five months since the last one in Saudi Arabia in February last year and the first face-to-face G20 meeting since the start of the COVID-19 pandemic.
It was attended by 14 countries and major international organizations. Six countries participated by video conference, including China, India and Indonesia.
Bilateral talks were held between finance ministers as well as group discussions.
The meeting deliberated on the global economic outlook after the pandemic. “Many members including Korea expressed concern about the uneven recovery,” Hong said.
Korea seeks 20% digital tax to reduce burden on Samsung, SK hynix
Source: Buhay Kapa PH
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