Minister Kim Jeong-gwan, the nominee for the Ministry of Trade, Industry and Energy, announced plans to promote production tax credits in the secondary battery and semiconductor sectors, which has garnered a welcoming response from the battery industry. Production tax credits are performance-based subsidies that reduce taxes relative to the quantity produced of specific items domestically.
Ahead of the personnel hearing scheduled for the 17th, the nominee stated in a written response submitted to the National Assembly, "The urgent situation of overcoming the crisis and enhancing competitiveness of our secondary battery industry due to the electric vehicle chasm and the rise of China requires expansion of incentives to induce domestic production and investment, as well as an active review of introducing production tax credits for domestically produced key minerals and materials to strengthen supply chain value chains."
President Lee Jae-myung had previously stated during the presidential election that he would introduce a maximum production tax credit of 10% for semiconductors and promote the introduction of production tax credits for secondary batteries.
The nominee also mentioned plans to create a 'battery triangle belt' connecting the Chungcheong, Yeongnam, and Honam regions. This is interpreted as an extension of President Lee's statement during the presidential election about creating a secondary battery industry belt in the Daegu-Gyeongbuk region.
The secondary battery industry insists on the need for support measures besides production tax credits since many factories are located in the United States, Hungary, Poland, and elsewhere. The reason LG Energy Solution, Samsung SDI, and SK On have factories overseas is to reduce freight costs by situating themselves near customers.
The secondary battery industry desires to receive the investment tax credit in a direct refund manner. The current Restriction of Special Taxation Act designates the battery industry as a national strategic technology, providing tax credits of about 15% for facility investment (based on large enterprises) and around 30% for research and development. However, since it is deducted from corporate taxes, they cannot benefit if they incur losses.
A representative from the secondary battery industry said, "The government's commitment to fostering the secondary battery industry has raised expectations. I hope incentives related to facility investment will also be provided." Another industry representative noted, "I hope the amendment to the Restriction of Special Taxation Act, which complements direct refunds for investment tax credits, will pass."