In this paper we construct the Dynamic Computable General EquilibriumModel for Korea to analyze the effect of corporate income tax(CIT hereafter)reduction on the Korean Economy. We analyze and compare the threedifferent policy alternatives for CIT reduction among which Scenario 1 is CITreduction by 5%p at once, Scenario 2 is two-step CIT reduction, and Scenario3 is five-step CIT reduction during five years from 2008.Based on policy simulations we find that CIT reduction will increaseinvestments for all scenarios. Furthermore, Scenario 1 will increaseinvestments in shortest time in the short run. As a result Scenario 1 will resultin most capital formation. Secondly, when it comes to the effect of CITreduction on consumption, for all scenarios consumption will increase in thelong run. The government expenditures will decrease owing to decrease in taxrevenues due to CIT deduction. Therefore, CIT reduction will increase GDPfor all three alternatives both in the short run and the long run. Thirdly,regarding on the income distribution effect of CIT reduction all income classeswill benefit from CIT reduction so that Pareto improvement will be obtained.In addition income distribution will also be improved from CIT reform. Inconclusion in terms of efficiency and equity CIT reduction in Korea isdesirable. Policy implication is such that the Korean government should doCIT reduction immediately.