Foreign firms unhappy with tax burden: KCCI

Nearly seven in 10 foreign companies in Korea said they would consider withdrawing from the country if their tax burden continued to grow, a poll showed Wednesday.

According to a survey of 158 foreign businesses conducted by the Korea Chamber of Commerce and Industry, 69 percent of the respondents said “withdrawal could seriously be contemplated” if the nation chooses to levy heavier taxes.

The KCCI reported that most of the respondents expressed unease about the nation’s corporate tax environment.

The poll showed that 58.9 percent of them saw the current tax environment here as less favorable than that of their respective home countries.

Only 11.4 percent said their tax burden in Korea is lighter than in their countries, and 29.7 percent of them responded that the tax level was similar.

A foreign chief executive underscored the need to improve the nation’s taxation system, claiming that some businesses could face unexpected sanctions from tax authorities.

“If a customer orders something, the company issues an invoice. But if a customer doesn’t accept it (for whatever reason) then there may be a mismatch (in tax reportage),” said Thomas Geyer, president of Vector Korea IT Inc., a Germany-based firm.

“Sometimes there is confusion with the declaration of taxes in Korea,” he said. “If there is a mismatch, according to Korean laws, companies can be subject to penalties.”

Meanwhile, the KCCI said 76.6 percent of foreign companies advocated tax reduction, arguing such steps can improve management conditions for companies.

On moves by local politicians to demand collecting more taxes to fund various welfare projects, foreign companies were overwhelmingly opposed to such steps.

The survey also showed that 82.2 percent and 78.5 percent were against raising private income and corporate tax rates, opposing to cutting tax breaks offered for business investments.

A KCCI official said foreign enterprises appear to be more sensitive to sudden fluctuations in tax rates and related policies vis-a-vis Korean firms.

“In a bid to attract more foreign investment which can fuel job creation, more predictable tax policies should be carried out,” he said.

Earlier this year, the National Tax Service said it would reduce the frequency and scope of tax audits on foreign companies doing business here.

“We’ve decided to make fewer random visits to foreign companies because they have been honest taxpayers as a group,” an NTS official said.

By Kim Yon-se and Renee Park
(kys@heraldcorp.com) (renee@heraldcorp.com)