Korea sees brighter tax outlook on chip supercycle

Seoul [South Korea], November 20 (ANI): The South Korean government is turning more optimistic about next year's corporate tax revenue as strong earnings at major semiconductor makers bolster the fiscal outlook, as per a report by Pulse, the English service of Maeil Business News Korea.

The news report, quoting government sources on Thursday, noted that the Ministry of Economy and Finance is reassessing its 2025 tax projections in light of fresh economic forecasts from major institutions and newly reported third-quarter results.

In its national tax revenue plan released in August, the government forecast next year's corporate tax take at 86.5 trillion won (USD 58.9 billion), up 3 trillion won from this year's second supplementary budget. The Pulse reported that the projection leaned heavily on robust corporate performance throughout 2024.

Corporate data tracker CEO Score found that 339 of Korea's top 500 companies that filed third-quarter reports as of last week posted a combined operating profit of 73.21 trillion won, up 22.4 percent from a year earlier.

Samsung Electronics Co. and SK hynix Inc. accounted for more than half of the gain, powered by an emerging semiconductor supercycle. Operating profit rose 32.5 per cent at Samsung Electronics 61.9 per cent at SK hynix from a year earlier.

In an outlook released Tuesday, NH Investment & Securities Co. said government corporate tax revenue typically rises the year after Samsung Electronics and SK hynix report higher net income.

"This year's increase in semiconductor exports is expected to lift next year's corporate tax revenue," the firm said, as per the Pulse report.

The National Assembly Budget Office is even more bullish, projecting 87.5 trillion won in corporate tax revenue for 2025, about 1 trillion won above the government's estimate, the Pulse report noted. Higher prices for key export categories, including semiconductors, which boosted earnings in the first half and are expected to continue supporting results through the rest of the year.

Still, risks remain.

Recent stock market volatility linked to concerns about a potential artificial-intelligence bubble has raised questions about the durability of the chip cycle, the news report added.

"If the AI cycle weakens, Korean semiconductor profits will inevitably fall," NH Investment & Securities warned, adding that any downturn "could create fiscal pressures for the government with a lag."

Other sectors are showing weaker performance, including autos affected by tariffs and petrochemical companies undergoing restructuring.

Revenue could also be influenced if the National Assembly modifies the planned 1-percentage-point corporate tax rate increase contained in this year's tax reform bill. The Budget Office estimates the increase would add 700 billion won to next year's tax take.

"We're updating our projections based on corporate earnings and considering whether to reflect the revisions in the budget review," the Pulse report noted, quoting a government official. (ANI)

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