Korea's Finance Minister defends planned tax on corporate cash reservesUpdated: 2014-07-26 18:16:35 (KST)
Korea will introduce a new tax on companies' cash reserves to get them spending again as the government looks to breathe life into Korea's sputtering economy.
Speaking at a forum hosted by the Federation of Korean Industries on Saturday, Finance Minister Choi Kyung-hwan urged the nation's leading businesses to start spending their internal reserves.
"Suppose the net profit is 100, then companies should use 70 on investments, dividends and wages. Then companies will face no additional taxation."
The government has been considering this measure for some time.
It hopes that, with more disposable income, households will increase their spending and consumption boosting the economy.
The finance minister said the new tax rate would be around the 3 percent level.
Over the last five years, the Korean government has cut corporate tax rates from 25 percent to 22 percent.
Korea's business community says companies need cash reserves to deal with potential uncertainties in the future.
They say most of the money set aside has already been earmarked for use to buy land, buildings, build plants and purchase production facilities.
Ji Myung-kil, Arirang News.
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