ATJ Asian Tax Journal

Asian Tax Journal

Print ISSN 1738-3323 Online ISSN 2733-9270

Improvement of the Donation Exclusion Rule about the Employee Stockholders Association

  • Gyuyung Hwang Kookmin University

Asian Tax Journal Vol. 21 No. 3 (2020), pp. 9-28

Abstract

The donation exclusion rule about the Employee Stockholders Association(ESA) was designed as part of tax preference in order to promote major shareholder’s donation to ESA and solidify the financial structure of ESA. This research reviewed the tax revision history about the donation to ESA. This study also analyzed the weakness of the current tax provision about the donation to ESA and sought the improvement plan about it. According to this analysis, the corporate tax provision about the exclusion limit of donation to ESA is different from the individual tax. Besides this inequity, the corporate tax enforcement regulation lacks internal consistency. In other words, the exclusion limit of donation to ESA stated in the corporate tax is established without consideration about the relationship between other donations(the regal donation and the designated donation). Therefore to remedy these problems and to improve the equity and coherence of the regulation, it is necessary to reform the corporate tax enforcement regulation about the exclusion limit of donation to ESA with the same contents of the individual tax. In addition to this plan, it is necessary to allow the carryover deduction benefit to the donation limit exceeded in ESA. In general, the donation to ESA get done more irregularly. Therefore in case of the donation to ESA, the limit excess is more likely to occur than the designated donation. Meanwhile the current tax regulation do not permit the donation to ESA to deduct carried forward. Consequently the current provision may restrict the autonomy and volition of donation to ESA. The proposal allowing the carryover deduction can resolve these shortcomings.

Keywords

  • Employee Stockholders Association
  • donation
  • exclusion limit
  • carryover deduction

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Asian Tax Journal

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