[Editorial] Foreign Companies With Low Domestic Contribution Need Institutional Remedies

Foreign companies operating in Korea have been found to make relatively low social contributions, paying very little corporate tax compared with their sales. Some foreign firms do faithfully pay corporate taxes and help create jobs, but many others do not. These companies also have social responsibilities, yet their performance falls short of expectations.
According to data from a private corporate data research institute, the average ratio of corporate tax to sales for foreign companies doing business in Korea is only 1.1%. The ratio is even lower for large firms with higher sales. In numerical terms, foreign companies are earning substantial profits in Korea while contributing very little in taxes.
Paying relatively little corporate tax does not automatically mean they are committing tax evasion. They are paying taxes in line with the laws and procedures in place. However, foreign companies with global networks have many ways to significantly reduce their tax burden within legal boundaries. They are deploying sophisticated tax-saving strategies without technically breaking the law.
Some firms are also believed to be underreporting their sales. Global platform companies fall into this category. The National Assembly of the Republic of Korea discussed this issue last year. Google Korea paid only 17.3 billion won in corporate tax in 2024. The company reported 632.8 billion won in sales, but academics estimate that its actual sales may range from 4 trillion to 11 trillion won. By comparison, Naver, a major domestic platform company, paid an average of 487.6 billion won in corporate tax over the past five years, about 5.9% of its sales. Other big tech firms such as Facebook and Netflix are in a similar situation.
Foreign companies that are not platform businesses have seen their corporate tax payments decline due to poor business performance. Their total corporate tax payments fell from 7.2365 trillion won in 2022 to 4.8226 trillion won in 2024, a decrease of 2.4139 trillion won, or 33.4%. As their pre-tax profits dropped by 12.4%, the amount of corporate tax they paid also went down. It is not easy to apply the same yardstick to platform and non-platform companies. S-Oil, for example, paid 837.5 billion won in corporate tax between 2020 and 2024.
Taxation systems for foreign companies, especially platform firms, need institutional improvements in line with international law and established national practices. Otherwise, issues of fairness and reverse discrimination against domestic companies may arise. At the same time, tax burdens should not become so heavy that foreign companies are discouraged from entering the Korean market. The government has introduced the Global Anti-Base Erosion Rules (global minimum tax), and from this year a domestic minimum top-up tax has also taken effect, which is said to complement the system. The real question is whether these measures will be implemented in a way that is truly effective.
Major foreign companies also lag in social contributions such as charitable donations beyond tax payments. Many of them have reported zero donations for three consecutive years or have not disclosed any related information at all. Companies that earn profits in Korea, even if they are foreign-owned, are morally obliged to return part of those profits to society. Korean companies operating abroad are no exception. If our firms earn substantial income overseas, they too must pay taxes as required by local laws and make social contributions, so that obligations are fulfilled on both sides.