Hong Nam-ki, Minister of Economy and Finance, speaks in a meeting with officials of the ruling Democratic Party on July 22, 2019. [Photo by Lee Seung-hwan]

South Korea, which had bucked the global trend by hiking corporate taxes last year, will extend temporary tax breaks to excite corporate investment at a time the Korean Inc. faces multiple whammies from reduced global demand and trade barriers from Japan, said economic chief Hong Nam-ki.

“We will come up with additional incentives on top of the emergency tax initiatives announced earlier this month to induce more rapid and active investment from companies,” Hong, deputy prime minister and finance minister, told the government-ruling party cooperation meeting on tax revisions for next year on Monday.

He cited the global economic slowdown, rising trade tensions, the chip industry downturn and Japan’s recent export curbs as some of the major factors weighing on the Korean economy and putting a drag on exports and investment.

The government gave a grimmer forecast for facility investment this year, expecting it to fall 4.0 percent instead of rise 1.0 percent as predicted six months ago. Korea’s central bank last week delivered its first rate cut in more than three years and further trimmed its 2019 growth outlook to 2.2 percent in what would be the country’s lowest growth rate since the global financial crisis in 2009.

Hong said the new tax relief would drive consumption, tourism and exports and help with the research of new technologies as well as the financing and talent recruitment in startups.

In the face of Japan’s export restrictions targeting Korean chip and display makers, Hong said tax deductions would be stretched to build up its technological self-sufficiency in core materials, components and equipment and reduce reliance on Japanese imports.

Tax code revisions will also include rationalization in alcohol levies as well as in the hefty inheritance tax to facilitate hereditary succession in family businesses, he added.

The latest tax breaks are an accompaniment to a tax relief package announced earlier this month as part of the government’s second-half policy outline to stimulate the economy. The measures included expanded tax deductions on all facility investments made to improve productivity. The scope of eligible facilities was broadened and the period for the existing tax break extended by another two years to the end of 2021. The application of accelerated depreciation was also extended to the end of this year so that more companies can enjoy deductions earlier in their capital investments.

By Chung Seok-woo and Kim Hyo-jin

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