By Choi Kyong-ae
Staff Reporter


The Ministry of Finance and Economy Thursday said that it is considering raising corporate income tax to help make up for an expected shortfall in tax revenue.

Vice Finance-Economy Minister Bahk Byong-won said the government remains cautious about raising taxes to replenish tax revenues but recognized that it is a possible option.

Bahk said the government will decide whether to raise it or not by the end of the year. The government is seeking more than 5 trillion won in supplementary budget to make up an estimated 4.6 trillion won in revenue shortfall this year.

``Most of all, the government should put the country’s growth engine back on track to fill the cash-strapped national coffers. Regaining moderate growth should come before raising taxes,’’ Bahk said.

With the country’s growth for this year forecast at around 4 percent, the Bank of Korea has kept its key interest rate at a record low of 3.25 percent since last November to boost the economy.

Bahk said the government will take a cautious approach toward raising corporate income tax or value added tax rates.

``Squeezing taxpayers would only lead to worsened private spending. People will not open up their wallets. The government is wise to decrease tax cuts and take a belt-tightening policy,’’ he noted. ``If all the measures do not work, the government will have no choice but to ask for higher corporate income taxes.’’

The country’s corporate tax rate was cut by 2 percentage points earlier this year. A 25-percent tax rate is currently imposed on a taxable corporate income of 100 million won or more, with a 13-percent rate being levied on corporate income of less than 100 million won.

Bahk said that the country’s economic recovery remains modest at best as companies are reluctant to expand capital spending with an uncertain economic outlook.

However he said consumers are spending more and overall domestic demand is expected to gather momentum in the remainder of the year.

godamon@koreatimes.co.kr