Research Paper on South Korea's Tax Regime and Rates

Introduction

South Korea is composed of local and national taxes, and the people are defined as either non-residents or residents depending on their domicile. For a non-resident, the tax is imposed on the income derived from businesses or any source within South Korea while a resident's revenue from both within and outside the nation is liable for taxation. The tax rates for the personal income are 8% for income of 12 million KRW or less, 17% on more than 12 million, 26% on more than 46 million and 35% on more than 88 million (Expat, 2018). The companies established within South Korea are regarded as domestic companies, and their worldwide income is liable for taxation while foreign countries are only taxed on the income generated within the country. Further, the foreign companies that lack permanent establishments (PE) in South Korea are subjected to withholding taxes as they generate income from the payments made to it. Corporate tax includes capital gains, annual revenue, and liquidation income and is imposed on all companies at the end of every fiscal year. The corporate tax rates are 10% for taxable income amounting to 200 million KRW or less, 20% for a range between 200 million and 20 billion KRW and 22% on over KRW 20 billion (Expat. 2018). Some companies such as fishing and farming may be exempted from corporate taxes, but they may have to pay other types of taxes like office and planning tax.

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Furthermore, ninety percent of the income derived from dividends and received by institutional investors from companies defined by Security and Exchange Act such as Korea Stock Exchange-listed corporations are exempted from the taxable income (Expat, 2018). If financial holding companies, as defined and declared by the Financial Holding Company Law or Korean Fair Trade Commission are holding fifty percent or more of the assets owned by the subsidiaries and obtain dividends from them, a certain dividend percentage will be subtracted from the holding companies' taxable income. The deduction rates are 90% for dividends received from unlisted companies in the case where the holding company owns 80% of the subsidiary's assets. If the subsidiary company is listed, the dividend reduction rate is 90% in case the ownership ratio of the holding company is more than 40%. Interests being paid on debts such as loans are also deductible if the borrowings are meant for income producing. Moreover, branch tax is imposed on the companies if the agreement between South Korea and the foreign nation allows its imposition on the "adjusted taxable income" of the branch within the country.

South Korea's Strategies to Attract Foreign Companies

South Korea's economic stability has significantly developed from one of the poorest countries to the fourth largest in Asia. Through numerous favorable socio-economic and political policies and reforms, the nation has improved to a high-income country in only one generation. Despite many challenges faced by many governments to establish financial transformation such as inadequate resources, mismanagement of economic utilities and economic depressions, South Korea's fiscal transformation, frequently considered a "Miracle of the Han River," provided a platform for elevation for dominance in the global economy in the 21st century (Kyung-Tae, 2012). According to the United Nations Conference on Trade and Development (UNCTAD) 2018 World Investment report, South Korea has managed to attract several investors due to its irresistible incentives that allow foreign investors to accumulate massive profits, which propelled its economic development. For instance, after the withdrawal of the Tesco limited company in 2015, a significant contributor to the Korea's economic stability, the country still accumulated an income flow of $12 billion in 2016 and an increase to $17 billion in 2017 from foreign direct investments in major commercial areas such as the information technology spheres and the petrochemicals (Kim, 2017).

Conversely, the tax incentives on the foreign direct investments have encouraged many nations such as the United States, China, United Kingdom, Singapore, Vietnam, and Japan to invest in diverse economic elements ranging from the Insurance, real estate, transportation, manufacturing, communication trade, and mining. South Korea's government established the Foreign Investment Promotion Act that protects the rights and the national operations of foreign companies in the region. Through developing a platform that discourages discrimination of business stakeholders, whether local or international, the country was has been able to attract many multinational organizations and business enterprises. For example, in 2000, the government amended the new FIPA regulations to allow numerous tax holidays for both international organizations and the local companies that invest in agriculture, technology, and transportation (Kyung-Tae, 2012). Also, it established the foreign investments zones, free economic zones and free trade zones that allowed many to escape taxation, hence promoting structural developments. For example, in 2007, the nation signed a free trade agreement with the US. In 2009, it facilitated the European Union-South Korea Free Trade Agreement and in 2014, the China-South Korea Free Trade Agreement opened the country for international economic exploration (Kim, 2017). The liberation of land acquisition, hostile M&As, the introduction of the ombudsman system and acknowledgment of foreign participation in key industries and public enterprises inspired more overseas companies to invest in South Korea. Therefore, it contributed to the rapid socio-economic development of the country.

Additionally, the abolition of foreign equity shareholding restriction of 50% in credit -offering firms, individual foreign investors, allowing fill overseas ownership of Korean banks and promoting foreign nationals as board members of local Korean banks significantly encouraged many investors into the country as they realized the massive opportunities and relatively compliant reforms and policies in the nation (Kyung-Tae, 2012). Despite having inadequate resources, and densely overpopulated regions, the nation's rigorous education system that advocates for invention and innovation, which enabled the nation to adopt the export-oriented economic strategy to propel the country. The peaceful and stability in the government, highly skilled workforce, high-quality infrastructure, high level of disposable household income and dominant position in high-end electronics provide a conducive business environment that facilitates productive business operation and quality customer services that frequently attract investors to the nation. According to the International Monetary Fund, South Korea indicates low state debt, resilience against various economic crises and high fiscal reserves that could be readily utilized to address fiscal emergencies. The guaranteed simplified procedures and creation of a position of state mediator dedicated to foreign direct investment tax reliefs has promoted a symbiotic relationship between the government and the foreign investors resulting in economic and structural development.

Description of the Coca-Cola Company

Coca-Cola Company is a multinational organization operating in over 200 countries both developed and developing nation. The company deals in soft drinks ranging from Coca-Cola, Fanta, Minute Maid juices, Dynamic Kin, PowerAde, Vio Soonsoo, and Georgia coffee. The organization, established in 1886, is the largest and the leading manufacturer, distributor, and marketer of all the non-alcoholic beverages concentrates and syrups. With its overlapping expansion, the company has significantly developed over 230 brands with unique taste and feeling (Santos & Laczniak, 2015). Its multinational branches have not only accumulated massive income and returns but also provided employment opportunity for many people from skilled accountants and manager to unskilled carries and transporters. For instance, in 2007, the company's subsidiaries employed approximately 30,000 people around the world reducing the level of unemployment and overdependence on foreign aids (Santos & Laczniak, 2015). Also, it accumulates more than 80% profit from overseas markets due to the constant availability of their products and affordability resulting to its popularity not only in the united states but also in other continents like Africa and Asia.

In addition, despite the tremendous success of the company in many parts of the world, it is faced with multidimensional challenges such as the cropping competition like the Pepsi Company that also manufactures soft drinks, the bargaining power of suppliers and consumers, and rivalry between firms. The setbacks prevent smooth operations of the business but remain the top multinational company because of its competitive advantages generated by the superior resources and skilled personnel. Nevertheless, the company has significantly contributed to the economic growth of many nations and satisfaction of many consumers due to the effective, efficient and standardized quality products that they offer. According to the 2016 annual review, it generated a revenue of $41.863 billion with only 21 of the 500 brands generating annual retail revenue of more than $1 billion (Krishnaswamy, 2017). The widespread global brand has accorded it the third position after Apple and Google in the Best Global Brands rankings. Therefore, the Coca-Cola company globalization strategy has significantly contributed to its growth and development with its positive effects being felt everywhere in the world.

Moreover, the SWOT analysis provides an essential platform for the in-depth understanding of the Coca-Cola Company. The SWOT analysis exposes the strengths of the company such as its extensive multinational regional occupation, large market shares that allows it to sell more beverage product to its consumers, a broad distribution network that encourages adequate, efficient and effective distribution of the products. The Coca-Cola Company has also established a good relationship with the different consumer across the globe, who have become loyal to the organization (Krishnaswamy, 2017). Nevertheless, the company has many weaknesses ranging from stiff competition from other beverage manufacturing organizations like the Pepsi, Unilever Group, and Groupe Donane. It has limited diversified products that limits the consumers' preference. Unlike Pepsi that trades in other products that generate more income, the Coca-Cola only focusses on beverage products, which reduces it revenue capability. Also, the company only produces carbonated soft drinks that some consumers consider as unhealthy hence, shunning away from its purchase. The unavailability of healthy alternative products without carbonated elements restricts the viability of the company and loss of customers to competitors. Therefore, the company must devise strategies to correct and eliminate the weaknesses to reduce limitations and revenue losses globally.

Furthermore, the Coca-Cola Company has many opportunities that can be utilized to increase the profitability of the organization. For instance, if it engages in diversification allowing the sale and distribution of other products such as snacks and healthy drinks without carbonated additives, it would increase its popularity, consumer flow and accumulate more profits (Krishnaswamy, 2017). Improving the packaging brands of some substances such as the Kinley and developing the supply chain strategy would propel the organization to establish a cheap, effective and efficient transportation to facilitate the frequent availability of its unpopular products like the Kinley. Conclusively, the company can significan...