Samsung Electronics has reportedly paid no corporate taxes this year due to over 11 trillion won in operational losses last year. Historically the largest corporate taxpayer in South Korea, Samsung’s lack of payment this year dims the overall tax revenue outlook.
According to industry sources on April 22, Samsung Electronics’ consolidated operating profit, including its subsidiaries, was about 6.6 trillion won last year. However, the separate operating profit, excluding overseas subsidiaries and affiliates that pay taxes abroad, showed a loss of 11.5 trillion won. Consequently, Samsung did not pay corporate tax this March, based on last year’s performance. Corporate taxes are only paid when a company is profitable, so no payment is required from a company that has incurred losses.
This marks the first time in 52 years, since 1972, that Samsung has not paid corporate tax. “Samsung Electronics recorded losses from its founding in 1969 until 1971, but then consistently posted profits until two years ago,” an industry insider explained. “This year is estimated to be the first since 1972 with no corporate tax to pay.”
The electronics giant may receive some corporate tax deductions in the future. Companies that have recorded losses can receive a reduction in corporate taxes when they return to profitability, corresponding to their previous losses. According to Samsung’s financial statements, the corporate tax expense calculated for last year is about -7.9 trillion won. However, unlike personal income tax, which is refunded through year-end settlements, the reduction in corporate taxes will be applied to future tax occurrences. “The 7.9 trillion won is an accounting figure, and the actual offset amount may vary,” said an official from the Ministry of Economy and Finance.
Overall corporate tax revenue is expected to be lower this year than in previous years, as Samsung Electronics, consistently a top corporate taxpayer, has not made any tax payments. The government expects to collect 77.7 trillion won in corporate taxes this year, down 27.3 trillion won, or 26%, from last year’s budget.
This year’s outlook for income and fuel tax revenues is also not promising. Until February this year, 24.1 trillion won in income tax was collected, about 300 billion won less than last year. The decline is due to major corporations not paying performance bonuses amid poor financial results. Concerns have arisen that tax revenue might decrease as the government has decided to extend the fuel tax cut, originally scheduled to end this month, by an additional two months.
