Publications
KIEP Opinions
High Profit Margins but Low Business Investment: Can Businesses Be Taxed To Invest?
- Author YOON Jungmo
- Date2015-08-28
Korean economy experiences a period of High
Profit Margins but Low Business Investment. Can government tax the corporations
to invest? If it can, should it do the policy? We examine the recent
experiences in Korea and other developed economies to find answers.
But critics have their point. The money can
be and perhaps should be better spent. It can generate a virtuous circle for
the economy if it is used to hire more workers and newer investment goods. What
is behind the national sentiment is the frustration coming from the recognition
that leading business groups failed to invest and failed to create quality
jobs.
It is hard to miss the irony here. In 1997,
when the country was in economic turmoil, over-investment, or better put
inefficient investment, was viewed as a cause of the crisis. The same business
conglomerates were accused of making haphazard and wasteful investment
decisions fueled by cheap subsidized credit. The investment glut has become an
investment shortage. This is indeed a significant change in just less than 20
years.
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