Corporate tax breaks to surge 77% next year, deepening tilt toward large companies

South Korea’s tax expenditures are expected to break the 100 trillion won mark for the first time next year, with corporate tax reductions growing far faster than other categories and concentrating benefits among large companies.

The government’s 2027 tax-expenditure budget submitted to the National Assembly projects total tax expenditures of 104.9 trillion won, about 21% above this year’s 87 trillion won estimate. Corporate tax reductions account for the largest increase. They are expected to reach 32.8 trillion won next year, up 77% from 18.5 trillion won this year and 2.7 times the 2025 figure of 12 trillion won.

Corporate tax reductions are also taking a larger share of the total. Their proportion is projected to rise from 15.8% in 2025 to 21.2% this year and 31.2% next year. Over the same period, the share of income-tax reductions is expected to decline from 60.8% to 56.7% and then 50.9%.

The increase reflects expanded tax credits for integrated investment in business assets such as machinery and equipment, as well as credits for research and workforce development. The investment credit is projected to rise from 2.5 trillion won last year to 6 trillion won this year and 16.6 trillion won next year. Credits for research and workforce development are forecast to increase from 4.1 trillion won in 2025 to 6.9 trillion won in 2026 and 10.5 trillion won in 2027.

The benefits are expected to flow particularly to major semiconductor companies, including Samsung Electronics and SK Hynix. The Ministry of Finance and Economy estimates that large companies subject to cross-shareholding restrictions will receive 49.9% of next year’s national tax reductions, up from 16% in 2025. The share attributed to small and medium-sized companies is projected to fall from 70.4% last year to 42.2% next year. Chungnam National University economics professor Jeong Se-eun questioned the need for further credits while semiconductor investment remains strong, saying tax credits should encourage investment when investment is insufficient, not when companies are already investing according to their own needs.

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Tax credits should be used to encourage or support investment when investment is not taking place, but when semiconductor investment is already being made sufficiently according to companies’ own needs, there is no need for the state to provide tax credits.