Following semiconductors, secondary batteries and artificial intelligence (AI) have also begun preparing support measures focusing on ‘government subsidy support and tax credit cash refunds’. This is because existing tax credits alone have limitations in attracting investment, and the need for preemptive response to the ‘risk of Trump’s second term’ is increasing as much as in the semiconductor industry. However, it is unclear whether the government will be able to extend subsidies to industries other than semiconductors due to tax revenue deficits and antipathy toward supporting large corporations.
Photo by Getty Images.
According to the political circles and industry on the 17th, lawmakers from the ruling and opposition parties are currently scrambling to prepare support bills to strengthen the competitiveness of high-tech industries such as secondary batteries, AI, and bio. This is a response to major countries such as the United States and Japan offering astronomical subsidies and support measures to strengthen the competitiveness of these industries. Korea has maintained an indirect support method centered on tax credits.
Rep. Park Soo-min of the People Power Party said, “Direct subsidy support ‘violates World Trade Organization (WTO) regulations,’ but it has already been neutralized by the discriminatory subsidy policy of the IRA (Inflation Reduction Act) in the United States,” adding, “The high-tech industry is “As the nature of ‘national competition’ is strong, it is time for us to establish a strategic big picture and actively take action, whether through subsidies or tax support,” he emphasized.
In order to revitalize the secondary battery industry, Rep. Park recently proposed a bill requiring the non-deducted amount of investment in national strategic technology commercialization facilities to be refunded in cash or transferable to a third party.
A bill to provide direct government subsidies is also being considered. The National Assembly Secondary Battery Forum, launched last September, is pushing for legislation including the provision of such subsidies. The Korea Battery Industry Association will collect industry opinions and promote it through a motion by lawmakers within the year. There will also be a debate on related bills in December.
The AI industry also believes that subsidies and tax support are desperately needed for the construction of large-scale AI data centers. Accordingly, the Ministry of Strategy and Finance will accept suggestions from the industry and the National Assembly and first pursue a plan to include AI as a national strategic technology. Once included in the national strategic technology, a deduction rate of up to 40% for medium-sized and large companies and 50% for small and medium-sized companies will be applied to research and development (R&D) investments. Democratic Party lawmakers Ahn Do-geol and Jeong Seong-ho have already proposed amendments to the Special Taxation Restriction Act with related content.
An AI industry official said, “The United States and other countries are increasing their investments in AI data centers,” and argued, “Beyond R&D tax credits, support for facility investment and infrastructure should also be provided.”
Some in the government and political circles are suggesting that such subsidies should be included in the existing National High-Tech Industry Special Act and applied to all related high-tech industries. However, there are many opinions that additional subsidy support is realistically difficult due to insufficient government finances and the threat of tax revenues drying up.
Kim Sang-hoon, chairman of the People Power Party’s policy committee, said, “First of all, this time, the special law was applied only to the semiconductor industry. There has been no discussion yet about expanding the subsidy under the National High-Tech Industry Special Act.”
Reporter Seong Hyun-hee [email protected], Reporter Choi Da-hyeon [email protected]
