South Korea’s corporate tax rate, including local taxes, is somewhat low compared to those of other Organization for Economic Co-operation and Development (OECD) countries with economies that are similar in size to Korea’s, according to Koo Yun-cheol.

Koo is the nominee for deputy prime minister and minister of economy and finance and gave these remarks on Tuesday in a written response to a question from Representative Kim Young-jin of the ruling Democratic Party of Korea ahead of his confirmation hearing scheduled for Thursday.

Koo also stated in response to a question from Representative Park Hong-keun of the ruling party that “our tax revenue base weakened under the previous administration due economic slowdown and corporate tax rate cuts, among other things.”

“I plan to review a rationalization of the tax system in line with the principle of ability-to-pay to improve tax fairness,” he added.

His remarks are viewed as a possible signal of a corporate tax hike. Korea’s current top corporate tax rate is 24 percent, which rises to 26.4 percent when local taxes are included. It had been at 25 percent for some time until the previous Yoon Suk-yeol administration lowered the top rate by one percentage point through a tax law revision in 2022.

However, a sharp decline in the semiconductor industry and listed companies’ operating profits, combined with the tax rate cut, resulted in corporate tax revenue shortfalls totaling tens of trillions of won in 2023 and 2024.

According to the OECD, Korea’s top corporate tax rate is higher than that of the United States (21 percent), Germany (15.8 percent), Canada (15 percent), and Japan (23.2 percent), but lower than that of the United Kingdom (25 percent), France (25.8 percent), and Italy (24 percent).

According to the National Assembly Budget Office, the average nominal top corporate tax rate among OECD members is 23.9 percent (including local taxes), 2.5 percentage points lower than Korea’s. However, the average nominal top corporate tax rate among the Group of Seven (G7) countries is 27.2 percent, which is 0.8 percentage point higher than Korea’s.

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