The Blue House has postponed a meeting of senior advisors that was set to address the distribution of corporate excess profits. This decision appears to stem from backlash from the business community and a recognition that further social discussion is needed. However, the postponement leaves the issue unresolved.
Excess profits refer to excessive earnings resulting from temporary monopolies in the market, unexpected fluctuations in supply and demand, or wealth generated by a global boom in specific industries. This concept is typically associated with resource development companies in sectors like oil, gold, and diamonds.
The situation in the semiconductor industry is different. The profits generated here are the result of legitimate market competition among global rivals. These earnings are the outcome of significant investments and technological innovations made at considerable risk. Therefore, discussions about sharing excess profits in light of the current semiconductor landscape seem premature.
Moreover, it is challenging to justify a discussion about requiring companies to return the results of their legally and ethically sound business activities to society. Companies take on risks and uncertainties with every investment, and when markets cool or businesses fail, the astronomical losses are not covered by the state or society.
If losses are borne by private enterprises while profits during boom periods are claimed by the public, no company will be incentivized to invest in innovation. This becomes clearer when looking at other industries.
Global luxury brands often generate profits that are hundreds of times their costs, relying on brand value. How should we view real estate development profits, where individuals or companies make billions due to location, regulatory changes, or rising land prices? If a stock I purchased unexpectedly increases tenfold, should that be considered excess profit?
If the government's discussion of 'excess profit' refers to 'gains exceeding expectations,' then logically, all cases are similar. However, individuals who sell real estate are recognized for their investment performance after paying capital gains and property taxes. The same applies to stock investments. There is no argument for reclaiming excess profits from those individuals.
The same principle applies to companies that pay corporate taxes and earn profits through innovation. While it is possible to encourage investment for the innovation and future of the industry, demanding additional distribution framed in a value-biased manner contradicts fairness.
There is also a significant distortion and disregard for the current tax system. Corporate tax is structured progressively, meaning that as a company's profits increase, its tax burden also rises. When a company exceeds performance expectations, the taxable base increases significantly, leading to a substantial rise in 'excess tax revenue' collected by the state.
Thus, a considerable portion of corporate profits is already returned to society through the existing tax system. Imposing additional punitive distribution responsibilities on companies that have paid substantial taxes according to established rates constitutes double taxation and severely undermines legal stability.
The retained earnings and profits of companies are not idle funds. They serve to build resilience against upcoming recessions and provide the necessary capital for reinvestment in future advanced technologies like AI and semiconductors in a rapidly changing global competitive environment. Encouraging companies to keep their profits for autonomous investment is the most effective way to create a virtuous cycle that leads to job creation and enhanced national competitiveness.
Unless there is intentional monopolization or illegal activity, the legitimate achievements gained by companies taking risks should be recognized as theirs. Given that social contributions are already sufficiently made through the tax system, artificially imposed distribution theories riddled with logical contradictions should be avoided.
Creating a market-friendly environment that allows companies to invest freely and generate greater value is the true path to benefiting the national economy and society as a whole.
* This article has been translated by AI.
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