Top Conglomerates' Tax Breaks Surge 82%, Accounting for 71% of Total Increase

National tax exemptions and reductions received by top large corporate groups jumped by more than 80% year-on-year last year.

In contrast, tax breaks for small and medium-sized enterprises (SMEs) grew by a mere 4% range. According to the 2025 Tax Expenditure Settlement Report obtained from the Ministry of Economy and Finance by Representative Lee Yang-soo's office of the People Power Party on August 23, national tax exemptions for top cross-shareholding restricted enterprises (mutually restricted conglomerates) amounted to 4.2685 trillion won last year, marking an 81.8% increase from 2.3476 trillion won in 2024.

Mutually restricted conglomerates are entities among public disclosure-target corporate groups (large corporate groups) whose total assets account for 0.5% or more of the gross domestic product (GDP), also referred to as top large enterprises.

As of this year, there are 47 such groups.

The proportion of tax breaks for mutually restricted conglomerates out of total corporate tax exemptions (26.7612 trillion won) stood at 16.0%, up 6.0 percentage points from the previous year.

Tax expenditures function similarly to fiscal spending, as the government reduces taxes that would otherwise be collected with the aim of achieving various policy objectives.

On the other hand, tax exemptions for SMEs last year reached 18.8301 trillion won, posting a limited increase of 4.3%.

Their share of total corporate tax breaks declined from 75.1% to 70.4%.

Total corporate tax exemptions increased by 2.7021 trillion won compared to the previous year, with mutually restricted enterprises accounting for 71.1% of this increase.

SMEs accounted for 28.4%.

An official from the Ministry of Economy and Finance explained, "Tax credit for research and human resources development and integrated investment tax credits are heavily concentrated among large enterprises," adding, "It appears these results came about because companies in mutually restricted groups made active investments."

The tax credit for research and human resources development stood at 4.1476 trillion won last year, up 1.1902 trillion won from the previous year.

The integrated investment tax credit also rose by 719.4 billion won to 2.4887 trillion won.

For both credits, carryover deduction amounts were reflected in corporate tax filings last year following improved corporate earnings in 2024, and the scope of new growth, source technologies, and national strategic technologies eligible for tax credits was also expanded.

The Ministry of Economy and Finance added that this was also the result of a recovery last year, following a decline in total tax burdens and tax expenditures for mutually restricted groups in 2024 driven by worsening corporate performances centering on semiconductor firms in 2023.

The Ministry explained, "Due to the minimum tax rate system, corporate deduction sizes tend to expand as corporate earnings and calculated tax amounts increase, creating greater deduction capacity, while shrinking as corporate performances worsen and deduction capacity diminishes."

The category with the largest exemption amount, continuing from 2024, was the special income and tax deductions for insurance premiums, which rose 5.1% to 7.2530 trillion won.

Pension insurance premium deductions, which ranked third in 2024, moved up to second place with a 7.2% increase to 4.7581 trillion won, whereas the earned income tax credit fell to third place, dropping 1.6% to 4.6367 trillion won.

The fourth-ranking income deduction for credit card usage (from 4.0884 trillion won to 4.3243 trillion won) and the fifth-ranking integrated employment tax credit (from 3.8106 trillion won to 4.3035 trillion won) maintained their positions.

While the composition of the top five items remained the same for the second consecutive year, the earned income tax credit was the only one to experience a decline in exemption amount.

Among individual items, tax exemptions for gold bullion special taxation aimed at formalizing gold transactions surged approximately 13.9-fold, jumping from 6.1 billion won to 85 billion won.

Special VAT refund exemptions for foreign tourist cosmetic plastic surgery also increased by 125.2%, going from 77.8 billion won to 175.2 billion won.

Conversely, special taxation on investments in cooperatives and other entities decreased by 124.9 billion won to 911 billion won amid a drop in interest income caused by rate cuts.

Special taxation on tax-exempt comprehensive savings also decreased by 109.5 billion won to 799.6 billion won.

Total national tax exemptions last year reached 76.1084 trillion won, an increase of 5.5914 trillion won from the previous year.

The national tax exemption rate edged down 0.2 percentage points from 16.1% to 15.9%.

However, it exceeded the statutory limit (15.5%) by 0.4 percentage points.

The government reported to the National Assembly that this year's exemption amount will reach 80.5277 trillion won with an exemption rate of 16.1%, which will comply with the statutory limit (16.4%).

The Ministry of Economy and Finance announced the 2026 Tax Revision Plan, which reorganizes 115 out of about 241 total tax expenditures—roughly 50%—to achieve a total reduction effect of 2.5 trillion won.

In accordance with the amendment to the Restriction of Special Taxation Act, the Ministry submitted the tax expenditure settlement report to the National Assembly on the 18th for the first time this year.

Until last year, tax expenditure budget proposals were submitted to the National Assembly in September alongside the following year's budget bill, but the system has changed this year to submit the settlement report earlier than before.

(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.