[Title Page]
Contents
I. Introduction 9
II. Korean Service Sector: International Comparison 11
1. Korean service sector today 11
A. GDP share of service sector in Korea 11
B. Employment share of service sector in Korea 14
2. An International Comparison 15
A. Comparison in GDP share 15
B. Comparison in employment share 19
III. Preferential Taxation and Economic Growth 22
1. Measuring the preferential taxation among different sectors 24
2. Trends in coefficients of variation in the effective tax rates for Korea 27
3. International comparison of the degree of preferential tax regime 29
A. Comparison under the classification of 4 industries 29
B. Comparison under the classification of 13 industries 33
C. Comparison of tax exemption and reduction rates across industries 34
4. Empirical analyses of the degree of preferential taxation among industries and its economic impact 42
A. Overall economic growth and employment rate 42
B. Growth of the service sector 46
IV. Policy Recommendations for Increasing the Weight of the Service Sector in the Korean Economy 49
1. Tax revenue-neutral ways to lower the corporate tax rate 50
2. Reducing tax exemptions and reductions, while expanding the range of target beneficiaries 52
3. Introducing new tax benefits for the service sector 53
V. Conclusion 56
Bibliography 58
〈Table II-1〉 Growth Rates Comparison by Periods 13
〈Table II-2〉 Trends in Service Sectors' GDP Shares 18
〈Table II-3〉 Trends in Service Sectors' Employment shares 21
〈Table III-1〉 Industrial Classifications for Calculating Coefficient of Variation 26
〈Table III-2〉 Impact of Degree of preferential taxation among Industries on... 44
〈Table III-3〉 Impact of Degree of preferential taxation among Industries on the... 46
〈Table III-4〉 Impact of the Degree of preferential taxation among Industries on... 48
〈Table III-5〉 Impact of the Degree of preferential taxation among Industries on... 48
〈Table IV-1〉 Tax Expenditure share by Industry (2012) 50
[Figure II-1] The Trend in the GDP share of Service Sector in Korea 11
[Figure II-2] The Comparison of Growth Rates 12
[Figure II-3] Employment share of the Service Sector 15
[Figure II-4] Service Sectors' GDP Shares in OECD Member States (2010) 16
[Figure II-5] Service Sectors' Employment Shares (2010) 19
[Figure III-1] The degree of preferential tax regime in Korea 29
[Figure III-2] Comparison of Degree of preferential taxations under the 4... 33
[Figure III-3] Comparison of Degree of preferential taxations under the 13... 34
[Figure III-4] Comparison of All-industry Average Tax Exemption and Reduction... 36
[Figure III-5] Comparison of Corporate Tax Exemption and Reduction Rates:... 38
[Figure III-6] Comparison of Corporate Tax Exemption and Reduction Rates: Finance... 39
[Figure III-7] Comparison of Corporate Tax Exemptions and Reduction Rates: Other... 40
[Figure III-8] Comparison of Corporate Tax Exemption and Reduction Rates: Agriculture... 41