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Top office, DP agree to raise corporate tax rate to 25%

Published: 29 Jul. 2025, 17:31

First Vice Finance Minister Lee Hyoung-il, center, speaks with a staff member during a party-government consultation meeting on tax reform held at the National Assembly members' office building in Yeouido, western Seoul, on July 29. [NEWS1]

The Lee Jae Myung administration and the ruling Democratic Party (DP) agreed Tuesday to raise the corporate tax rate and lower the threshold for capital gains tax on large corporate shareholders, effectively reversing the previous government's tax cuts.

The government and liberal DP agreed to restore the top corporate tax rate to 25 percent, up from the current 24 percent, in a policy consultation meeting held Tuesday. The former Yoon Suk Yeol administration had cut the rate from 25 percent to 24 percent in 2022, its first year in office.

“There’s been a lot of criticism that lowering corporate taxes doesn’t necessarily lead to increased investment by businesses, as past experiences under the Roh Moo-hyun and Lee Myung-bak administrations have shown,” Rep. Jung Tae-ho, a DP member of the National Assembly’s strategy and finance committee, told reporters after the meeting.

“We’re rectifying an ineffective tax cut,” Jung said.

Since its peak of 34 percent in 1993, Korea’s top corporate tax rate has gradually declined.

Under former President Lee Myung-bak, it fell to 22 percent by 2009. The Moon Jae-in administration raised it to 25 percent in 2017, only for the Yoon government to lower it again in a bid to boost economic activity.

If the latest proposal passes the National Assembly, the top rate will return to 25 percent within three years of the last change.

Capital gains tax target to broaden

The parties also agreed to lower the threshold at which shareholders become subject to capital gains tax.

Currently, only major shareholders who own more than 5 billion won ($3.6 million) of a single listed stock are subject to the tax. The new plan would reduce that threshold to 1 billion won, which would significantly increase the number of investors on the hook.

“We are merely returning to the previous standard,” said Jung. “The threshold was originally 1 billion won before the Yoon administration raised it to 5 billion won.”

No conclusion on dividend tax proposal

The parties did not reach a decision on whether to introduce a separate taxation system for dividend income. The proposal has divided DP lawmakers.

Currently, dividend income is taxed as part of aggregate income, potentially pushing taxpayers into higher brackets.

A separate system could lower taxes, particularly for investors with moderate dividend earnings.

The idea was part of President Lee Jae Myung’s campaign pledge to help usher in a “Kospi 5000 era,” referring to a goal of significantly boosting the main stock index.

However, internal dissent has emerged within the party over whether such a move would benefit mainly the wealthy, such as Korea's powerful conglomerates.

“The Park Geun-hye administration tried this before, but it didn’t significantly boost dividends,” said one attendee at the meeting.

In 2014, the Park government introduced a tax regime aimed at encouraging dividend payouts to increase household income and stimulate spending. But critics, including the DP, with a parliamentary minority, argued that the policy disproportionately benefited large shareholders.

Another attendee, however, supported the idea, adding that “dividend income under 20 million won should also receive some benefit.”

First Vice Finance Minister Lee Hyoung-il, second from left, attends a party-government consultation meeting on tax reform held at the National Assembly members' office building in Yeouido, western Seoul, on July 29. [YONHAP]

The agreement made Tuesday will form the backbone of the Ministry of Economy and Finance’s 2025 tax reform package.

Rep. Kim Byung-kee, interim leader and floor leader of the DP, said during a party strategy meeting on Tuesday, “In the past three years under the Yoon government, the state coffers have been depleted, and we are now saddled with debt."

He added that the party would work with the Lee administration through its tax reform task force to develop “reasonable tax normalization measures.”

The DP has appointed three-term Rep. Kim Young-jin to lead the special committee on tax reform, with Rep. Jung serving as secretary.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY KIM YEON-JOO, HA JUN-HO [[email protected]]