Officials stress securing tax revenue , fiscal balance to ward off external risks The government on Thursday decided to scrap plans to cut corporate tax rates for conglomerates , compromising following calls for fiscal balance and more spending on the poor . In a meeting to discuss tax revisions for the next four years , the presidential office , the ruling Grand National Party and the Finance Ministry agreed to retain the 22 percent corporate tax rate , reversing earlier plans to lower it to 20 percent for companies making more than 50 billion won in taxable income . “ Lowering taxes is the government ’ s plan for the long - term but we need to prioritize on securing tax revenue for the growing welfare expenditure , ” Baek Woon - chan , chief of the Finance Ministry ’ s tax division , told reporters after the meeting . “ Sound fiscal balance is especially important as the country faces external risks from worsening debt woes abroad , ” he added . The reversal comes as the Lee Myung - bak administration grapples with falling popularity ahead of next year ’ s general elections . The final tax revision also signals a shift in government policy away from lowering taxes to prioritizing job creation , supporting the poor and sound fiscal management . The new proposal aims to generate 3 . 5 trillion won of incremental tax revenue by 2015 , mainly from high - income earners and conglomerates . Corporate tax rates will be lowered to 20 percent from the current 22 percent for companies generating taxable income of between 200 million won and 50 billion won annually . The highest tax rate of 35 percent for individuals with an annual income of more than 88 million won will stay in place . There is a fresh plan to raise 100 billion won from companies generating profits by contracting with their affiliates ― a business practice disadvantaging smaller independent businesses fighting for deals . It is in line with the Lee administration ’ s push for shared growth and a fair distribution of wealth that emerged after the fast economic recovery from the 2008 downturn highlighted the persistent income gap between the haves and have - nots . “ Giving deals to affiliates under same corporation and illegal inheritance transfers will be subject to fresh taxes , ” Finance Minister Bahk Jae - wan said . The proposal however is controversial and fiercely opposed by major business groups . Stronger tax tools will be introduced to encourage job creation . The temporary investment tax credit on corporations will be replaced by expanded tax incentives for companies creating jobs . Companies will be able to enjoy tax deductions of up to 6 percent on their investments if they increase hiring . For small - and - medium sized companies , tax deductions will be available on social insurance costs of hiring fresh workers for the first two years . There will be more subsidies for low - income earners to stay employed . Those with less than 25 million won in annual income will be eligible for subsidies of up to 1 . 8 million won a year , up from the current 1 . 2 million won . New taxes are planned to curb capital inflows into the country . They include imposing taxes on income earned from foreign currency bonds issued in Korea , often called kimchi bonds . Other measures to limit foreign capital include taxing some derivative products . To stabilize rent prices , the revision bill calls for easing requirement for leasing with increased tax incentives . A sales tax reduction of up to 30 percent will be offered to those who own more than one home , a returning measure to encourage home transactions . Income tax deductions for credit card use will be expanded with additional deductions given to credit card charges at traditional markets . By Cynthia J . Kim ( cynthiak @ gmail . com )