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Business group calls for eased rules on dividend tax

May 20, 2012 - 19:50 By Korea Herald
A leading South Korean business organization said Sunday it has requested the government soften taxation rules for dividends companies receive from their domestic and overseas subsidiaries.

“Taxes on dividend income are tantamount to double taxation because they are levied after subsidiaries pay corporate taxes,” the Korea Chamber of Commerce and Industry said. “All dividends received from subsidiaries should be exempt from taxation.”

Currently, South Korean companies have 30-50 percent of their dividend income exempt from taxation, which is far lower than 70-100 percent in the United States, France and most advanced economies, according to the KCCI.

The KCCI slammed some lawmakers’ move to toughen taxation on dividends received from subsidiaries, which runs counter to a trend toward lowering corporate taxes.

It also asked the government to improve other “irrational” taxation rules and give companies more benefits, including taxes on their entertainment expenses, in order to help boost corporate vitality.

“Amid a slow global economic recovery and a raft of domestic and external uncertainties, excessive corporate taxes will surely sap corporate vitality, coming as a stumbling block to South Korea’s economic growth,” a KCCI official said.

The government expects Asia’s fourth-largest economy to grow 3.7 percent this year, but private think tanks are less optimistic, forecasting the growth rate may drop to the low 3 percent range. (Yonhap News)