SME Ombudsman Choi Seung-jae. [Herald]
SME Ombudsman Choi Seung-jae. [Herald]

Small and medium-sized enterprises are calling on the government to extend and expand a job-retention tax credit scheme set to expire at the end of this year, saying companies that have held on to their workers despite rising fixed costs deserve stronger support.

The SME Ombudsman held a regulatory reform forum Tuesday with the Korea Management Innovation SME Association, known as MainBiz Korea, at Gwanghwamun Building in Jongno-gu, Seoul.

The forum was organized as a follow-up to a growth-ladder forum held in April to hear firsthand concerns from management-innovation SMEs — companies recognized for innovation not only in technology development but across their overall operations, including organizational structure, marketing and production. As of the end of last year, 25,449 companies held that certification.

Calls are growing for substantive policy support in job retention and financing for management-innovation firms, separate from the government's existing programs focused on technology and venture companies. Tuesday's forum centered particularly on demands to ease the tax burden on small businesses that have maintained their workforce.

Under the current scheme, SMEs that have kept workers on payroll and adjusted wages rather than cutting staff during periods of financial difficulty can deduct a set percentage of the reduction in total wages and the increase in hourly wages from their corporate or income tax. The program is scheduled to end at the close of this year.

MainBiz Korea said the current deduction rates provide insufficient incentive to retain workers, given that fixed costs for small businesses have grown sharply — with the minimum wage rising 71.1 percent compared with 11 years ago. The association urged the government to raise the deduction rates to 20 percent and 30 percent, respectively, and to extend the program through the end of 2028.

"If the benefit is too small, companies facing hard times will ultimately choose to cut staff," said Kwon Jong-sun, a MainBiz Korea director.

However, an immediate extension appears unlikely given the government's tax reform direction. SME Ombudsman Choi Seung-jae said that because the government determined in its 2026 tax reform plan — announced Aug. 3 — that the program had served its purpose and should be wound down, raising the deduction rate or extending the scheme would not be easy for now.

Choi instead proposed verifying through data how effective the program has actually been in preserving jobs. He suggested examining corporate case studies to assess its impact and called on MainBiz Korea to conduct a survey of its member companies to build an evidence base for potential improvements.

Participants also called for expanding eligibility for regional SME development funds. Metropolitan and provincial governments operate such funds to support startups, business stabilization and regionally specialized industries, but companies said the level of preferential treatment for management-innovation SMEs varies widely by local government, making the benefits hard to feel in practice.

MainBiz Korea asked that local government ordinances and fund management plans explicitly list management-innovation SMEs as eligible recipients, on the grounds that they are innovative enterprises on par with venture companies and technology-innovation SMEs.

Regarding this issue, the ombudsman said it had submitted regulatory improvement recommendations to 15 metropolitan and provincial governments, including the Seoul Metropolitan Government, and that 10 had responded.

Incheon plans to pursue expanded loan support for MainBiz-certified companies as part of its 2027 project plan. Gyeonggi Province currently awards a 10-point bonus to management-innovation SMEs and said it would review additional support measures as part of next year's fund management planning process.

Ulsan allocates 10 billion won ($7.07 million) each to the technology-innovation and management-innovation sectors, while Gangwon Province applies a loan ceiling 100 million won higher for innovative SMEs than for general companies.

Companies also submitted proposals covering expanded policy finance support for Yeosu, a petrochemical crisis-response zone; a temporary increase in the business entertainment expense ceiling; broader eligibility for relaxed Kosdaq listing review requirements; expanded exemptions from the Greater Seoul acquisition tax surcharge; improvements to the Public Procurement Service's credibility assessment criteria in its excellent-product designation program; and reforms to the Public Procurement Service's innovative-product designation program.

"Even for issues where answers are not immediately available, the door to discussion reopens as on-the-ground evidence accumulates," Choi said. "We will continue to work with the relevant ministries on the proposals that came out of today's forum to turn them into improvements that small businesses can feel."


boo@heraldcorp.com