Problems and Improvement Plans Related to Special Tax Reduction or Exemption for Small or Medium Enterprises for Medical Business

Currently, the industries eligible for Special Tax Reduction or Exemption for Small or Medium Enterprises are listed using a closed-list system, which raises various issues such as tax equity. To address this, it is ultimately necessary to transition to an inclusive-list system while gradually reducing the reduction rate. Under this approach, all industries should be included except for those involving luxury consumption, such as entertainment and nightlife businesses, which are not suitable targets for tax support. Since the introduction of the National Health Insurance system in July 1989, South Korea has guaranteed universal access to healthcare for its citizens. All medical insti- tions provide healthcare services based on a fee schedule linked to the national insurance system. This demonstrates that medical services perform a public function and pursue the public interest to some extent. Given this context, there is no justification for applying the special tax reduction for Special Tax Reduction or Exemption for Small or Medium Enterprises differently to hospitals and clinics within the medical service industry. Given that legislative reform to shift the eligibility criteria for the special tax reduction for Special Tax Reduction or Exemption for Small or Medium Enterprises from a closed-list system to an inclusive approach may require extensive deliberation and time, the current discriminatory application of this tax benefit to hospitals and clinics in the medical service industry should be addressed as a matter of urgency. In particular, under the current regulation, clinics are eligible for the special tax reduction only if more than 80% of their total revenue is derived from services reimbursed under the National Health Insurance(NHI) scheme. However, considering that the vast majority of clinic revenue typically originates from both NHI-covered services and medical aid programs, achieving this 80% threshold based solely on NHI reimbursements is practically difficult. As a result, many clinics are excluded from benefiting from the special tax reduction, even though they operate under conditions similar to hospitals and serve essential public health functions. To rectify this, legislative amendments should be made without delay to either (i) calculate the 80% threshold by combining revenues from both NHI and medical aid reimbursements, or (ii) lower the current 80% requi- rement to a more realistic level in relation to total revenue. Such reforms would enhance policy coherence, improve tax equity, and ensure broader and fairer access to tax benefits within the healthcare sector.