Background

• - Aiding the growth of the art and culture service industry, and promotion of a healthy night lifestyle through the creation of new demands in the art and culture service sector.
  • ※ Total corporate expenditure in entertaining business partners: \5.4 trillion ('04), \5.1 trillion ('05)

Introduction

• - Implementation of a task force team to increase the competitiveness of the service industry(April - December, 2006)
• - First included in the government's special policy to increase the competitiveness of the service industry(Dec. 14, 2006)
• - Adoption of cultural expenditure for entertaining business partners

Main contents

• - Range of cultural expenditure
  • ‘Purchasing tickets for art performances, exhibitions, museums, etc. as defined in the provisions for the promotion of art and culture.
  • ‘Purchasing tickets for sports events as defined in the provisions for the promotion of national sports
  • ‘Purchase of video products as defined in the provisions for the promotion of film and video materials
  • ‘Purchase of music products as defined in the provisions for the promotion of music industry
  • ‘Purchase of published materials as defined in the provisions for the promotion of the publishing and printing industry
• - Main contents
  • Government offers reduction in corporate tax when the percentage of cultural expenditure within overall expenditure in entertaining business partner exceeds 3%.

Expected results

• Economic aspect

  • When the ratio reaches 10%, a corporation can expect a \15.7 billion reduction in its corporate tax.
    • This is based on the special corporate tax law amendment made on Feb. 14, 2007.
  • Creation of new demands worth \162 billion - \540 billion for the art and culture service industry
    • ※ Amount of government subsidies for the art and cultural service industry ('07): \344.4 billion (national treasury: \230.8 billion + fund: \203.6 billion)

  • Percentage of cultural expenditure

    Percentage of cultural expenditure	Cultural expenditure before the amendment	Effects of increased cultural expenditure *	Cultural expenditure after the amendment
    1%(Case 1)	50 billion (5 trillion×0.01)	54 billion (50 billion×1.08)	104 billion (50 billion+54 billion)
    3%(Case 2)	150 billion (5 trillion×0.03)	162 billion (150 billion×1.08)	312 billion (150 billion+162 billion)
    5%(Case 3)	250 billion (5 trillion×0.05)	270 billion (250 billion×1.08)	520 billion (250 billion+270 billion)
    10%(Case 4)	500 billion (5 trillion×0.1)	540 billion (500 billion×1.08)	\1.04 trillion (500 billion+540 billion)

  • *The above table was formulated based on the October, 2005 report by Hanmi Accounting Co. According to the report, the surveyed corporations answered that they were willing to increase their cultural expenditure by 108% if the amendment was legislated. The increased cultural expenditure will create corresponding demands in the art and culture service sector.

• Social aspect

  • It will open the door for corporations to aid the growth of the art and cultural service industry through a variety of channels including direct contribution, advertising and sponsorship, etc.
    • * Through such activities, corporations can improve their public image, while enriching the cultural life of the general public
  • It will help to increase the competitiveness of our art and cultural service industry, and contribute to cultural diversity.
  • It will help to promote a healthier night lifestyle, and channel the money in to more productive endeavors.

< Executive Ordinance #130 for Special Tax Law >

• The amendment defines 'cultural expenditure' as follows:

1. Purchasing tickets for art performances, exhibitions, museums, etc. as defined in the provisions for the promotion of art and culture

• 2nd clause, 1 of 1

  2nd clause, 1 of 1 "The term 'art and culture' includes literature, art (including practical fine art), music, dance, theatre, motion picture, entertainment, traditional Korean music, photography, architecture, language study and published materials."

1. Purchasing tickets for sports events as defined in the provisions for the promotion of national sports

• 2nd clause, 1 of 1

  2nd clause, 1 of 1 "By sports, it means engaging in physical activities that promote health and sound mind."

1. Purchase of video products as defined in the provisions for the promotion of film and video materials

• 2nd clause, 12

  2nd clause, 12 "Video materials includes all video tapes and discs that can be played by an electronic device to reproduce stored contents."     (Exception: video game materials as defined in the 2nd clause of the provisions for the development of the gaming industry)

1. Purchase of music products as defined in the provisions for the promotion of the music industry

• 2nd clause

  2nd clause 4."Music disc includes all tape or disc materials that have recorded audio contents on them." 6."A music video is a tape or disc that has recorded audio and visual contents."

• ※ Exception: computer music, video files

1. Purchase of published materials as defined in the provisions for the promotion of the publishing and printing industry

• 2nd clause, 5

  2nd clause, 5 "Published material includes books, audio books, digital books, periodicals, and all medium carrying written words for communicative purposes."

• ※ The July 19, amendment to the provisions for the development of the publishing and printing industry will be put into effect starting from January, 2008