| | JUNE 202319Indigenous Tax Incentives Provision for the Semiconductor IndustryIn a possible indication of rising protectionism in the global chip market, the country's trade minister repeated complaints that the requirements for Korean companies to access US funding are unfavorable. Therefore, to provide tax incentives to its semiconductor industries, South Korea created the Korean Chips Act.Besides that the Korean National Assembly sought to revise the passed down the Restriction of Special Taxation Act to increase the degree of tax reductions. Companies making investments in the nation's critical industries, such as semiconductor manufacture, will receive the reductions.These tax breaks have been observed by the large corporations like Samsung Electronics and SK Hynix offering tax credits of up to 15 percent on investments into strategic technologies like semiconductor manufacturing, up from eight percent previously. The Tax breaks also seem to be largely in line with earlier reports regarding the Korean government's plans.Unfortunately, the bill was met with criticism as it disappointed politicians from the two main parties, the industry, and academia due to less-than-expected advantages.Revision of the BillInitially, the bill was intended to boost tax incentives to promote growth in high-tech industries like semiconductors, biopharmaceuticals, and electric car batteries. But upon inspecting the limited advantages of the bill, four associations that represent the regional semiconductor sector and the committee's non-political members asked the National Assembly to rethink the passed bill that amends the Restriction of Special Taxation Act.Some from the academia and business community voiced out that it would be preferable to veto the bill than to pass it.While others disagreed, and argued that as a nation entering a global chip war, the expansion of investment and tax credits should be viewed from a global viewpoint. Due to the minimal tax credits, it would be difficult to develop a strong semiconductor industry.Bills related to the K-chips act that would streamline the licensing procedure and improve professional training are also losing ground. The act's initial changes included increasing the amount of applicants approved for majors in semiconductor-related fields. That section of the bill was left out during negotiations for causing regional strife as the policy would benefit universities in the greater Seoul area more than others. As part of the agreed-upon student numbers, the bill was adjusted to reflect the number of students admitted to the respective majors.The academic community has vehemently criticized the issue, contending that the legislators are blind to the wider picture and are allowing the semiconductor industry's future potential to be constrained by current regional conflicts. THE TAX BREAKS ARE OBSERVED TO BE ENCOURAGING DOMESTIC INVESTMENT IN IMPORTANT TECHNOLOGY INDUSTRIES AND THE TAX CREDIT RATE FOR SMALL AND MEDIUM-SIZED BUSINESSES ARE ALSO EXPECTED TO INCREASE FROM 16 TO 25 PERCENT
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