SEJONG, South Korea Aug 6 South Korea will
introduce a new set of tax rules aimed at encouraging companies
to increase dividend payouts, spend on their workers and invest
in production facilities, the finance ministry said on
The move is a follow-up to stimulus measures that the new
finance minister introduced last month to boost domestic demand
and keep Asia's fourth-largest economy on a firm recovery path
in the face of sustained weakness in global demand.
The package of new rules will give tax breaks to companies
that increase spending on employment and investment while it
levies a tax on those holding excessive cash reserves, the
Ministry of Strategy and Finance said in a statement.
"Our main focus is to revitalise the economy and we adopted
the package to create a firm foundation for higher domestic
spending," Deputy Finance Minister Joo Hyung-hwan told a
briefing on Monday. The briefing was embargoed until Wednesday.
For example, a large company will be levied a 10 percent tax
on surplus funds when it spends less than 80 percent of net
profit on dividend payouts, additional wages or investment in
The ministry expects about 4,000 companies to be subject to
the new tax rule on surplus cash, said Moon Chang-yong, a
director general at the ministry.
The new tax rules, which require parliamentary approval,
will be applied to operations for the 2015-2017 period, the
ministry said. President Park Geun-hye's single five-year term
ends in February 2018.
Beside the new tax rules, the ministry unveiled various
changes to the tax code as a result of its annual review that it
said were intended to boost tax revenue while lessening the tax
burden on lower-income earners.
Finance Minister Choi Kyung-hwan has warned that South Korea
was in danger of slipping into the kind of long slump that Japan
had been in for two decades and offered stimulus measures in
late July, including $11 billion in new spending plans.
Share prices rallied to three-year highs and the property
market showed signs of improvement since the middle of June when
Choi, then a nominee, promised stimulus measures. He officially
took office in late July.
(Reporting by Christine Kim; Editing by Choonsik Yoo and