The Ministry of Economy and Finance at the government complex in Sejong City. /Shin Hyun-jong

South Korea’s corporate tax progress rate for the first half of this year has hit a record low due to the poor performance of domestic companies last year.

According to the Ministry of Economy and Finance on Aug. 4, cumulative corporate tax revenue from January to June was 30.7 trillion won, with a progress rate of 39.5%. This rate represents the proportion of the expected annual revenue collected up to this point. The projected corporate tax revenue for this year is 77.7 trillion won.

This is the first time since 2014, when relevant statistics began, that the corporate tax progress rate has fallen below 40% by June. Total national tax revenue for the first half (168.6 trillion won) also decreased by 10 trillion won compared to the same period last year. The decline is attributed to major corporations like Samsung Electronics and SK Hynix reporting operating losses last year, resulting in zero corporate tax payments this year.

The decline is also affecting local tax revenues, as companies pay 10% of their corporate tax as local income tax. According to Democratic Party lawmaker Yang Bu-nam’s office, 10 out of 17 cities and provinces, including Seoul and Incheon, saw a decrease in local tax progress rates in the first half compared to the previous year.

However, there is potential for recovery with the upcoming interim corporate tax payments from August to October being crucial. This system allows companies to prepay part of their expected tax for the following year. Companies can choose to pay either half of the previous year’s tax or an amount based on their first-half performance.

Companies that incurred operating losses last year must base their interim payments on their first-half performance to prevent zero tax payments. Firms like Samsung Electronics and SK Hynix will make interim corporate tax payments based on their first-half results. Given their strong performance in the first half, there is a high likelihood that the corporate tax progress rate will improve in the second half of the year.

A Ministry official said, “While a shortfall in tax revenue this year seems inevitable, the extent of the shortfall could be mitigated by the scale of corporate tax payments in the latter half of the year.”