Finance Minister Choi Sang-mok speaks during an economic ministers' meeting in the central administrative city of Sejong, 113 kilometers south of Seoul, on Monday. (Yonhap)
The government will extend greater tax benefits and tailored support to smaller companies to help them become second-tier midsized firms in an effort to create quality jobs and spur growth momentum, the finance ministry said Monday.
A set of such supportive measures were presented during an economic ministers' meeting presided over by Finance Minister Choi Sang-mok, which also called for extending an additional 7 trillion won ($5.07 billion) of funding to exporters.
"A smaller number of SMEs have joined the second-tier class recently, and one of the main reasons appears to be the reduction in state incentives for bigger firms. SMEs rather opted to remain in the category to get greater tax incentives and financial support," a ministry official said.
The number of SMEs that became second-tier firms has decreased from 313 in 2017 to 87 in 2022, and the government aims to more than double the number through "the corporate growth ladder project."
Under the plan, the government will extend the grace period during which second-tier midsized companies can enjoy the same tax benefits as SMEs to five years from the current three years.
The period will be extended further to seven years if the entities go public.
The government will also provide up to 35 percent of tax deductions for research and development projects for the second-tier companies for three years after the grace period ends.
Various incentives, including hiring grants and technology development subsidies, will be extended to the second-tier firms, which are currently available for SMEs.
In South Korea, companies with assets of more than 500 billion won and annual sales of 150 billion won or larger fall into the category of large conglomerates.
Companies in the category of SMEs have less than 500 billion won of assets and their annual sales are less than 150 billion won. Those in between are deemed to be second-tier midsized companies.
The government will devise a new program to promote the scaling up of 100 promising SMEs, under which it will provide tailored strategies and help them have greater investment and business opportunities.
The government also put forth a set of measures for exporters to promote exports, a key growth engine for South Korea.
It will earmark an additional 5 trillion won of export financing for this year from the current 360 trillion won, and five major private banks will increase the amount of loans that provide favorable conditions for exporters by 2 trillion won to 7.4 trillion won.
The ministry also decided to remove tariffs on imports of naphtha and liquefied petroleum gas by the end of 2024 under the tariff quota system. The current tariff is set at 3 percent.
It vowed to ease administrative regulations with the goal of boosting the convenience of exporters.
The government also vowed to provide funds and other administrative support for their mergers and acquisitions in order to support their advances into new markets, the ministry said.
"The government aims to enhance the growth potential of our economy through the scale-up program. It will help lay the groundwork for companies to develop further and create an ecosystem for innovation," Choi said during the meeting.
"We will proactively extend support for exporters facing global protectionism. Rising exports have led our economic recovery and the government will strive for spreading such effects to other sectors," he added. (Yonhap)
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