Tax Incentives for Employment Promotion
Asian Tax Journal Vol. 12 No. 2 (2011), pp. 175-197
Abstract
In this study we try to analyse domestic and foreign tax incentives from the perspectives of labour demand and its effect on employment and to suggest reform direction for the incentive system. Research results can be summarized as follows. Effect of tax credit on employment promotion in Korea is estimated from 0.662% to 1.147%,because of low elasticity of labour demand. Firms of tax incentives are just 5.36% of examination samples and we find that the average tax credit amount is about 1 hundred million Won. It is just Salaries for 2 or 3 employee. As a reform direction of tax incentives for employment promotion we suggest as follows：At first, we suggest to apply this rule not only for small and medium size enterprises but also for large and non－profit enterprises. Secondly, it is also desirable to induce tax favourable system for temporarily employment promotion. Thirdly, we suggest to increase the limit for tax credit for employment from 3 Mill. Won to 6Mill. Won per head. Fourthly, we suggest to induce employment promotion linked to Social Welfare System. At last, we suggest a anti－abuse clause of tax credit on employment promotion.
Keywords
- Labour Demand
- Employment Promotion
- Tax Credit
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