ATJ Asian Tax Journal

Asian Tax Journal

Print ISSN 1738-3323 Online ISSN 2733-9270

Special Corporate Tax System for Specific Industry：An Analysis of International Legislation

  • Ye Ji Lee University of Seoul Graduate School of Taxation
  • Ji Sun Chung 세무전문대학원 University of Seoul

Asian Tax Journal Vol. 25 No. 2 (2024), pp. 107-132

Abstract

Based on the analysis of international corporate tax system, we identify whether policymakers need to consider special corporate tax base and tax rate system for specific industries. Considering major countries including the United Kingdom, Germany, and the Republic of Korea have already adopted tonnage tax system for the shipping industry, we exclude the shipping industry from the scope of our paper. We examine the special corporate tax system for specific industries in OECD and developing countries. When it comes to tax rates, major European countries such as the United Kingdom have introduced the patent box which applies low tax rates on income from intellectual property. In addition, China and Vietnam apply lower tax rates than the standard corporate tax rates for software and eco－friendly industries. Indonesian companies operating in real estate and construction pay withholding taxes calculated by multiplying sales by a certain percentage. In Indonesia, for some industries where cost calculation is difficult(i.e., the aviation industry), a certain percentage of sales is deemed as the corporate tax base. We have to consider the differences in the basic taxation system between our nation and other countries before introducing their tax systems in the Republic of Korea. Accordingly, the special corporate tax systems in other countries give the Republic of Korea meaningful implications. Firstly, to enhance the international competitiveness of software and eco－friendtly industries, the Korean government needs to improve the current tax credits which can be applied to related industries. Secondly, considering that the preferential tax rates for specific industries are generally half of the standard corporate tax rates in other countries, we suggest converting our tax incentive method from tax credit to tax reduction, for national strategic technology and new growth engines and source technology. Lastly, countries adopting a single corporate tax rate have introduced the preferential tax rate system for specific industries. Therefore, from a long－term perspective, this tax system can be discussed after gradually reducing the number of corporate tax base sections, from four to one, in the Republic of Korea. In conclusion, our study provides policy implications in that it suggests the necessity of special corporate tax system to improve the global competitiveness of specific industries.

Keywords

  • Corporate tax
  • tax base
  • tax rate
  • industry

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