After the enforcement of the’Kim Young-ran Act’, which limits the amount of meals and gifts related to job duties, it was found that corporate entertainment expenses continued to decrease.
According to the National Tax Service on the 3rd, entertainment expenses for 4,125 large and mid-sized companies exceeding 100 billion won in income (sales) in last year’s corporate tax filing were totaled at 2.6626.5 billion won.
The number of corporations increased by 623 (17.8%) compared to three years ago, but entertainment expenses decreased by 13.9%.
The average entertainment cost per company has steadily decreased to 872 million won in 2016, 722 million won in 2017, 644 million won in 2018, and 639 million won in 2019.
The average entertainment cost per large company exceeding 500 billion won in income also decreased by 30.0% from 2,431 billion won in 2016 to 1.8 billion won in 2019.
The average entertainment cost per company for all companies that filed a corporate tax report also decreased from 17 million won (reported in 2016) to 14 million won (reported in 2019).
Business activities in 2016 (December settlement corporations) and some 2017 (March-September settlement corporations) are reflected in the 2017 report, when entertainment expenses decreased by a double-digit ratio in one year. This period coincides with the time when the Kim Young-ran Act, ie the Act on the Prohibition of Unfair solicitation and receipt of money, etc., came into effect (September 2016). Entertainment expenses from the 2017 report to the Kim Young-ran Act’s enforcement and 2016 are mainly reflected before the enforcement.
A government official said, “There are differences in entertainment expenses in terms of tax laws and corporate accounting standards, but the reduction in corporate entertainment expenses since 2016 seems to have been the most impacted by the enforcement of the Kim Young-ran Act.”
However, from 2018, the third year of the law’s enforcement, the effect of reducing entertainment expenses has slowed.
Last year, the average reported amount of entertainment expenses for companies with income exceeding 100 billion won decreased by only 1.4% from 2018. For companies with income exceeding 500 billion won, it decreased by 3.3%. In 2017 and 2018, despite an increase in the number of corporations, the amount reported for total hospitality decreased, but last year it rebounded.
An official at a major financial company said, “After the law was implemented, the provisions of futures have been relaxed, and consumption promotion has recently emerged as a more important task, and it is true that the alertness against violation of the Kim Young-ran Act has softened from the beginning.