|KT employees set up a 5G base station in Daegu. Courtesy of KT|
By Kim Hyun-bin
Chiefs of the country's top three telecom companies plan to ask the government to provide them with wider tax cuts in terms of encouraging the telecom companies to invest more in the country's 5G next-generation wireless technology network infrastructure.
The top executives are scheduled to hold a luncheon with Science Minister Choi Ki-young in downtown Seoul, Wednesday.
No official comments have been made. However, telecom officials said the CEOs will request minister Choi to expand the size of the tax credit to represent the government's willingness to support key technologies that could affect national security and help the overall industry gain an upper hand over looming overseas rivals.
The central point of the meeting is why the expanded size of the tax cuts (credits) will be needed and how it will impact on the industry from various aspects. One possible scenario is that the possible tax incentives will be continued for a "certain period" for telecom firms which build wireless communication networks related to 5G.
Specifically, telecom companies are reportedly seeking to receive temporary investment tax credits of up to 10 percent for the 5G investments, according to people familiar with the issue.
Upon the specifics of 5G network expansion plans, the amount of tax incentives will be different, according to each plan. On a related note, a senior presidential secretary Kim Sang-jo recently asked the top three telecom companies and two major portals for concerted support on the government's "Digital New Deal" initiatives, the details of which will be announced, July 14.
Telecom companies have showed a mutual understanding of the need for the government project, but have been pressured over the easing of relevant tax rules under the country's Tax Reduction and Exemption Control Act.
Currently, under the act the telecom companies could receive a maximum deduction of 3 percent for their 5G investments, which was given to reduce the burden on telecom companies that were the first to commercialize the 5G services in April 2019.
The firms currently receive around 2 percent; the remaining 1 percent is given only when there is a 5 percent increase in employment. Also the tax deductions excludes 5G equipment investments, which takes up a great deal of the investment cost.
"When first commercializing the 5G network the 5G equipment was costly. The costs have been reduced since then but still are a burden to telecom companies," a telecom company official said. "The implementation of the temporary investment tax credit will include all aspects of the 5G network investments, which drastically reduces the investment burden on telecom companies."
The digital new deal serves as one of the main pillars of the Korean New Deal project, which aims for digital transformation utilizing 5G infrastructure and helping to create a 21st century industry structure through enhancements in the contactless technologies that have evolved during the COVID-19 pandemic.
The government has been pushing for digital new deal initiatives to help bring recovery to the sluggish economy that was impacted hard by the COVID-19 pandemic, as well as efforts to digitize industries and create more jobs for young people.
Through the measures the government plans to create a digital infrastructure, develop contactless industries and the digitization of social overhead capital.