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    Will hefty tax breaks be Korean chipmakers’ saviour?

    ANN/THE KOREA HERALD – The South Korean Finance Ministry proposed a plan to further expand tax breaks for the semiconductor industry to the world’s highest level amid escalating competition among chip powerhouses globally. The local industry hailed the decision as indicating the government’s renewed commitment to boosting the crucial chip industry, but uncertainties remain about its effectiveness, and whether it will be approved in parliament.

    “It is true that the revision comes belatedly, considering the situations in rival countries – but it’s a great relief for the whole industry,” an industry official said on condition of anonymity.

    “We need to be more prudent when investing in the chip business, since it requires some trillions of won worth of money. If we can receive such tax deductions (of up to 25 per cent), it will surely lessen the load,” the official added.

    The new revision push came only four days after President Yoon Suk-yeol instructed the Finance Ministry to come up with stronger tax benefits for the semiconductor and other strategic industries following the passage of the amendment bill that fell short of industry expectations of a 20-per-cent tax reduction.

    The government plans to provide a bigger tax deduction rate of 15 per cent for conglomerates investing in semiconductor facilities. The tax deduction rate for small and medium-sized enterprises will also rise to 25 per cent.

    The proposed plan is anticipated to help the local chip industry and others save over KRW3.65 trillion (USD2.85 billion) in taxes in 2024 and around KRW1.37 trillion won each in the following two years, according to the Finance Ministry.

    On the day of the announcement, several statements supportive of the decision were released industrywide. Industry players said they were satisfied with the government’s support despite the country’s tough economic situation. At the same time, they expressed their hope for the government’s continuous full-pledged support and interest to bolster the global competitiveness of Korean chipmakers.

    On the other hand, another industry official on condition of anonymity said that Korea’s expanded tax incentive plan still has room to improve, since countries including the United States and China are already set to offer many favourable conditions. The industry official added that Korea missed the boat to act earlier, amid growing concerns over an exodus of high-tech companies and workers from the country.

    “Policies are all about timing, but Korea is lagging behind rival countries. Local chipmakers have already gone through a sluggish performance, and their sentiments have worsened,” the official said.

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