Excluded Capital Region Protests “Reverse Discrimination”

As early as next year, small and medium enterprises in 59 local governments such as Boeun in Chungbuk, Hoengseong in Gangwon, Jeongeup in Jeonbuk, and Sangju in Gyeongbuk will be exempted from 70% of their corporate tax burden without time limits.

As this policy excludes small and medium enterprises in the capital region including Seoul, Gyeonggi, and Incheon, controversy is increasing over “reverse discrimination against the capital region.”

The government jointly hosted a “Public Hearing for a Draft Plan on Regional Classification Based on Development Levels” with the Presidential Committee on Balanced National Development, Ministry of Commerce, Industry and Energy, and Ministry of Government Administration and Home Affairs at the Korea Chamber Of Commerce and Industry building in Jung-gu, Seoul on September 19 and announced a draft regional plan that divides the 234 local autonomous entities into four regions based on their levels of development.

Once a region is labeled “underdeveloped,” small and medium enterprises doing business there or those transferring businesses to the region will be exempted from 70% of all corporate taxes without time limit, and from 10-20% of health insurance costs.

A large enterprise that moves into an “underdeveloped” region will be exempted from 70% of corporate taxes for 10 years and 35% for the following five years.

55 local governments, including Chungju in Chungbuk and Chuncheon in Gangwon, were classified as “Region 2” (standstill regions), and 62 local governments, including Yeoncheon in Gyeonggi, Cheonan in Chungnam, Wonju in Gangwon, Gwangyang in Jeonnam, and Masan in Gyeongnam were classified as “Region 3” (developing regions).

Meanwhile, most of the capital region, which covers 25 districts in Seoul, 8 districts in Incheon, and 25 local governments in Gyeonggi were classified as “Region 4” (developed regions) to which no tax exemption privileges will be granted.

In response to this draft plan of the government, some local governments such as Gyeonggi Province are raising strong objections that it is reverse discrimination against the capital region.

Governor of Gyeonggi Kim Mun-su announced yesterday, “This policy to divide the whole country into four regions and to grant privileges to enterprises only when they move from the capital region to provinces is oppression against Gyeonggi. Gyeonggi cannot approve of such a plan.”

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