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@article{ART001683123},
author={Sanghyun Hwang and Hyun Jong Kim},
title={Discussion and Policy Simulation on the Introduction of Conglomerate Tax},
journal={Journal of Regulation Studies},
issn={1738-7132},
year={2012},
volume={21},
number={1},
pages={169-222},
doi={}

TY - JOUR
AU - Sanghyun Hwang
AU - Hyun Jong Kim
TI - Discussion and Policy Simulation on the Introduction of Conglomerate Tax
JO - Journal of Regulation Studies
PY - 2012
VL - 21
IS - 1
PB - 한국규제학회
SP - 169
EP - 222
SN - 1738-7132
AB - This paper examines the discussions related to ‘conglomerate tax’(tax on investment in affiliates) and numerically estimates the impacts of introducing this system on corporate finance and investment. The conglomerate tax means a tax policy for large-size business groups that excludes deduction of dividend incomes between affiliates and interest expenses on debt for investment in affiliates. First, this paper compares the current tax system of Korea internationally, reviews academic discussions, and also investigates changes on corporate finance due to the introduction of taxation applicable. This paper estimates the effects on capital cost and investment of abolishing the exclusion of dividend income from gross revenue and the deduction of interest expense for forty domestic major firms in numerical analysis. On the assumption that funds for investing in affiliates are proportional to debt ratio for forty firms except holding companies that conglomerate taxes are applicable to, the result from policy simulation is that the cost of capital increases by 0.64%, and the capital for production decreases by 1.07% due to the conglomerate taxes. To say it another way, the amount of investment reduction becomes ￦ 2740.1 billion in tangible asset and ￦ 2548.2 billion in net tangible asset. The analysis shows that the effect of abolishing the exclusion of dividend income from gross revenue is 10 times less than that of abolishing the deduction of interest expense. This is why the exclusion rate of dividend income itself is currently very low, so that dividend payout ratio and equity share of affiliate are low.
KW - Conglomerate Tax;Corporate Governance;Ownership Structure;Large Size Business Group;Exclusion of Dividend Income from Gross Revenue;Deduction of Interest Expense;Double Taxation;User Cost of Capital;Investment
DO -
ER -

Sanghyun Hwang and Hyun Jong Kim. (2012). Discussion and Policy Simulation on the Introduction of Conglomerate Tax. Journal of Regulation Studies, 21(1), 169-222.

Sanghyun Hwang and Hyun Jong Kim. 2012, "Discussion and Policy Simulation on the Introduction of Conglomerate Tax", Journal of Regulation Studies, vol.21, no.1 pp.169-222. Available from: doi:

Sanghyun Hwang, Hyun Jong Kim "Discussion and Policy Simulation on the Introduction of Conglomerate Tax" Journal of Regulation Studies 21.1 pp.169-222 (2012) : 169.

Sanghyun Hwang, Hyun Jong Kim. Discussion and Policy Simulation on the Introduction of Conglomerate Tax. 2012; 21(1), 169-222. Available from: doi:

Sanghyun Hwang and Hyun Jong Kim. "Discussion and Policy Simulation on the Introduction of Conglomerate Tax" Journal of Regulation Studies 21, no.1 (2012) : 169-222.doi:

Sanghyun Hwang; Hyun Jong Kim. Discussion and Policy Simulation on the Introduction of Conglomerate Tax. Journal of Regulation Studies, 21(1), 169-222. doi:

Sanghyun Hwang; Hyun Jong Kim. Discussion and Policy Simulation on the Introduction of Conglomerate Tax. Journal of Regulation Studies. 2012; 21(1) 169-222. doi:

Sanghyun Hwang, Hyun Jong Kim. Discussion and Policy Simulation on the Introduction of Conglomerate Tax. 2012; 21(1), 169-222. Available from: doi:

Sanghyun Hwang and Hyun Jong Kim. "Discussion and Policy Simulation on the Introduction of Conglomerate Tax" Journal of Regulation Studies 21, no.1 (2012) : 169-222.doi: