The Korea Federation of Small and Medium Business held a meeting Monday with Lee Hyung-il, nominee for deputy prime minister and minister of the Ministry of Economy and Finance, at the federation's digital education center in Mapo-gu, Seoul, to present proposals on easing the tax burden on small business owners and strengthening social safety nets. Song Chi-young, chairman of the Korea Federation of Small and Medium Business (left), and Lee Hyung-il, first vice minister of the Ministry of Economy and Finance. [Korea Federation of Small and Medium Business]
The Korea Federation of Small and Medium Business held a meeting Monday with Lee Hyung-il, nominee for deputy prime minister and minister of the Ministry of Economy and Finance, at the federation's digital education center in Mapo-gu, Seoul, to present proposals on easing the tax burden on small business owners and strengthening social safety nets. Song Chi-young, chairman of the Korea Federation of Small and Medium Business (left), and Lee Hyung-il, first vice minister of the Ministry of Economy and Finance. [Korea Federation of Small and Medium Business]

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Small business owners have called on Lee Hyung-il, nominee for deputy prime minister and minister of the Ministry of Economy and Finance, to raise the simplified taxation threshold to as high as 200 million won ($148,000) and to keep the current value-added tax credit rate on credit card and other sales unchanged. They also asked that the VAT payment method be revised so that businesses pay VAT on sales made through online food delivery platforms and other platforms only when they actually receive the funds.

The Korea Federation of Small and Medium Business said it held a meeting Monday with Lee at the federation's digital education center in Mapo-gu, Seoul, where it presented proposals on easing the tax burden on small business owners and expanding social safety nets. Lee currently serves as first vice minister of the Ministry of Economy and Finance and was nominated as deputy prime minister and minister on Aug. 30.

The federation presented three core issues at the meeting: easing the tax burden and improving the taxation system, reforming rules that constrain cash flow, and building social safety nets while boosting consumer spending.

On the tax front, the federation asked that the 1.3% VAT credit rate on credit card and cash receipt sales — along with the annual cap of 10 million won — be kept in place. According to the National Tax Service, small individual business owners subject to receipt issuance requirements can deduct 1.3% of the amount issued via credit card or cash receipt from their VAT liability, up to an annual limit of 10 million won.

The federation also called for raising the simplified taxation threshold to as high as 200 million won. Currently, the regime applies to individual business owners whose prior-year supply value was less than 104 million won. That threshold was raised in July 2024 from the previous ceiling of 80 million won. The federation said the bar should be lifted further in light of rising prices and costs since then.

The group also called for eliminating credit card payment fees on national taxes for small business owners. The National Tax Service cut the credit card payment fee rate for small business owners' VAT and comprehensive income tax from 0.8% to 0.4% in December last year. For general taxpayers, the fee ranges from 0.4% to 0.8% of the tax amount depending on the type of card. The federation said a credit extension system similar to the one used for local taxes should be introduced to further reduce the burden on small operators.

To stimulate consumer spending, the federation proposed extending the 40% income deduction rate currently applied to traditional markets to purchases made at general small business establishments. It also asked the government to consider introducing a minimum income guarantee for small business owners whose livelihoods have been squeezed by fixed costs.

"If neighborhood commercial districts collapse, we cannot expect a healthy recovery of the national economy," federation Chairman Song Chi-young said. "We hope the proposals we have put forward will translate into new policies at the Ministry of Economy and Finance, so that small business owners can once again hold onto hope and focus on their work."

Lee said supporting the management stability and growth of small businesses is essential to easing economic polarization. "I will make every policy effort to ensure that the warmth of growth reaches all small business owners," he said.


hong@heraldcorp.com