Abstract

The Korean government introduced the corporate earnings circulation taxation system for three years(2015－2017) in order to circulates corporate income to the household through investment, dividend and wage increase. This was due to the need for active policy measures considering the concern about the low－growth structure and the widening gap between corporate income and household income. This study analyzed the effect of the corporate earnings circulation taxation system on investment, dividend and wage increase through an empirical analysis using the financial data(2012－2017) of companies listed on the securities market and the KOSDAQ market. According to the result of analysis, the system showed a significant positive relationship with investment and cash dividend. It means that the system had the effect of increasing the investment expenditure and cash dividend of the applicable companies. Among the applicable companies, in the case of the companies that selected the investment inclusion type, the system showed a significant relationship with investment while in the case of the companies that selected the investment exclusion type, the system did not show a significant relationship with investment. On the other hand, the system did not show a significant relationship with wage increase. It means that the applicable companies did not raise wages since it was difficult to raise and then lower wages due to its downward rigidity. This study systematically analyzed the effect of the corporate earnings circulation taxation system implemented from 2015 to 2017 at the time of obtaining the financial data for the entire period of application. The result of this analysis can provide important implications for investment and mutual cooperation promotion tax system, which was introduced as a substitute for the corporate earnings circulation taxation system in 2018. In addition, the corporate earnings circulation taxation system did not show a significant relationship with wage increase, suggesting that wage requires a comprehensive approach with other systems such as labor market supply/demand, wage policy and financial support.

Keywords

• corporate earnings circulation taxation system
• investment and mutual cooperation promotion tax system
• corporate retained income taxation system

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