ABSTRACT
The chapter suggests that the history of tax policy in Korea over the post-war years has been one of accommodation to broader changes in policy orientation, which in turn have been driven by non-tax considerations. As the Korean economy has grown, so has the tax system matured and changed, with replacement of commodity-specific indirect taxes by a value-added tax and base-broadening measures in personal and corporate taxes throughout the 1970s and 1980s. Taxes played a role in the early outward-oriented phase through the rebating both of cascading sales and excise taxes and of a portion of corporate taxes on earnings of export industries. Export incentives also included special depreciation arrangements in the corporate tax. The tax incentives in use are not designed to affect the structure of the economy but rather to promote neutrality by correcting market failures or compensating for them.
