South Korea Launches Services-Boosting Tax Measures
08 July 2013
Posted by: Author: Mary Swire
Author: Mary Swire
Discussions on how the South Korean services industry could be helped to provide more jobs and economic growth, by providing additional tax incentives among other things, took center stage at the latest Ministerial Meeting on the Economy.
The service sectors is an important part of the economy, accounting for 70 percent of South Korea's total employment and 60 percent of its total industrial output. However, while it has been a key driver of job creation since the 1990s, the sector's productivity is said to be low and its competitiveness is weak, compared to the domestic manufacturing industry and to services in other OECD countries.
Since the early 2000s, the Government has implemented a wide range of policies to develop the services industry. As a result, there have been good results in certain areas, such as tourism, healthcare and education, but there are also areas leaving room for improvement.
As a result of the discussions, which were chaired by Deputy Prime Minister Hyun Oh-Seok, it was confirmed that the Government will seek to stimulate service sector investment by improving its taxation, finance and regulatory systems. In particular, to level the playing field between the services and other industries and end discrimination against the services sector in the South Korean tax system, the special tax deduction for small and medium-sized enterprises (SME) and the tax credit for job-creating investment will be expanded for services.
In addition, within the 2013 tax reforms to be presented later this year, research and development (R&D) in the services sector providing high value-added will receive increased support through the tax system, such as increased tax benefits and a special tax exemption for income arising out of technology transfers by SMEs.