Finance Minister Choi Kyung-hwan and the nation’s business leaders met on Tuesday, agreeing to work together in boosting investment and alleviating government regulations.
However, tension lingered as the two parties remained at odds on Choi’s plans to impose taxes on excessive corporate cash reserves. Local conglomerates, which have recently been stockpiling cash to prepare for future risks, are vehemently opposed.
“In order to stabilize the economy, it is crucial that the business circles step up to help boost investment and create jobs,” said Choi, addressing the leaders of the nation’s top five business lobby groups.
The representatives, however, did not seem ready to accept Choi’s suggestions.
“The taxation on the companies’ cash reserves may result in more side effects than economic benefits,” said KFI chairman Hun Chang-soo. “(The issue) should be dealt with using greater caution.”
Upon taking office, the finance minister, who concurrently serves as the economic deputy prime minister, pledged to introduce stringent regulations on internal cash reserves. He said the purpose behind the controversial move was to dissuade firms from piling up cash, and instead urge them to dole out more dividends and spend more on investment.
Corporate Korea, however, is opposed to the move, claiming that it is nothing more than a device to squeeze more taxes from companies to fill government coffers.
To encourage the participation of local firms, the minister said he would seek to rejuvenate the economy as quickly as possible, pledging to expand the government’s macroeconomic policies and speed up its three-year economic development plan.
“Our economy can leap forward only if the government and business circles work together towards this common goal,” Choi said.
To make this possible, he promised setting up a communication hotline, through which industries may file complaints and suggest innovative ideas.
The business organizations, meanwhile, appeared to place more emphasis on enlisting support to remove government red tape.
“In order to add momentum to new business opportunities, the government should minimize prior regulations and change them into ex-post regulations,” said Park Yong-maan, chairman of Doosan Group and head of the KCCI. “Considering the negative factors such as the sinking of the Sewol, prolonged economic slump and volatile exchange rates, it is time to boost the public’s economic sentiment through aggressive measures.”
Following the meeting, Choi told reported that the purpose of his plan to tax cash reserves lies not in more tax revenues, but in making sure that their financial achievements are properly reflected in the economy.
“We will establish an action plan so as not to increase the tax burden for companies,” he stressed.
