Demands are mounting for the passage of legislation that would cut earned income tax by up to 50 percent for workers in non-capital regions ahead of the June 3 local elections. The push comes as talent continues to concentrate in companies in the Seoul metropolitan area despite the government's emphasis on balanced regional development.
According to the National Assembly and the business community Wednesday, regional economic organizations are actively calling for earned income tax cuts for companies in non-capital regions, as balanced regional development has emerged as a key agenda item for the local elections. The chambers of commerce in North Jeolla, South Jeolla, North Gyeongsang, and South Gyeongsang provinces have recently held a series of forums demanding earned income tax reductions for local companies.
They argue that direct tax incentives, rather than simple subsidies, are needed to boost the investment capacity of local companies and ease the concentration of young people in the capital region.
Lawmakers from both ruling and opposition parties have also competitively introduced region-specific tax reduction bills. In February, People Power Party lawmakers Heo Seong-moo and Koo Ja-keun proposed legislation to lower the corporate tax rate for small and medium-sized enterprises in non-capital regions by 3 percentage points across tax base brackets, and to cut income tax by up to 50 percent for workers employed in non-capital regions until the end of 2030.
However, concerns are also being raised within and outside the government. While corporate tax cuts could at least be expected to incentivize companies to relocate, applying differentiated earned income tax rates by region could spark controversy over reverse discrimination against workers in the capital area. Critics also point out that the tax revenue base could be weakened.
