Seoul, July 31 (NationPress) The South Korean administration on Thursday revealed a detailed tax reform initiative designed to enhance the national revenue framework. This includes an increase in the top corporate tax rate and a tightening of capital gains taxation by expanding the definition of substantial shareholders.

This reform represents the first significant tax revision under President Lee Jae Myung, who assumed office last month. It is part of the government's strategy to restore fiscal integrity and rectify perceived tax advantages that favor large corporations and affluent individuals, as reported by Yonhap News Agency.

The government anticipates that this reform package will yield an additional 8.17 trillion won (approximately USD 5.87 billion) in tax revenue over the next five years.

The Ministry of Economy and Finance stated that the top corporate tax rate will increase by 1 percentage point across all four tax brackets, effectively reversing cuts made by the prior administration under Yoon Suk Yeol in 2022.

Currently, corporate income tax is set at 9 percent for annual earnings up to 200 million won, 19 percent for income between 200 million and 20 billion won, 21 percent for income between 20 billion and 300 billion won, and 24 percent for income exceeding 300 billion won.

The new proposal would elevate the rate for each bracket by 1 percentage point, reinstating the highest rate to 25 percent.

The conservative Yoon administration had previously reduced the top corporate tax rate to 24 percent in 2022 to encourage private sector investments.

The proposed modifications await approval from the National Assembly. If endorsed, the revised corporate tax rates will apply to business income generated starting next year, with increased revenue anticipated to begin in 2027.

Additionally, to boost capital gains tax revenues, the government plans to decrease the threshold for classification as a large shareholder from 5 billion won to 1 billion won.

This adjustment effectively reverses a policy from the previous administration that had relaxed capital gains tax responsibilities by raising the threshold for large shareholders from 1 billion won to 5 billion won.

Under existing legislation, major shareholders in publicly traded companies face a capital gains tax ranging from 22 to 27.5 percent, inclusive of local income tax. This tax applies to stock transactions conducted during the preceding year, irrespective of price alterations.

"The resources secured through these measures will be reinvested into businesses to support the development of ultra-innovative products," stated First Vice Finance Minister Lee Hyoung-il during a news conference.

The reform is perceived as part of President Lee's broader initiative to overturn the tax strategies of the previous administration, which the ruling Democratic Party has criticized as being disproportionately beneficial to the wealthy and large conglomerates.

"Our revenue base has rapidly weakened over the past three years, resulting in a substantial increase in the nation's overall tax burden," Vice Minister Lee remarked. "This reform aims to restore the foundation of sustainable public finance."

The plan also proposes modifications to the education tax imposed on financial and insurance firms instead of value-added tax.

For businesses generating more than 1 trillion won in annual revenue, the education tax rate will increase from 0.5 percent to 1 percent, according to the ministry.

If implemented, this would represent the first adjustment in 45 years since the education tax was established in 1981.

Additional strategies aim to bolster the competitiveness of strategic future industries, such as artificial intelligence (AI), by enhancing R&D tax credits and investment incentives, officials indicated.

Tax relief for low- and middle-income families and small business proprietors will also be broadened to aid in stabilizing livelihoods and promoting inclusive growth.