[Asia Economy Reporter Kwangho Lee] The government has prepared a support plan worth 17.7 trillion won to revive the domestic economy frozen by the novel coronavirus infection (COVID-19). It will further ease the tax burden by 12 trillion won for about 7 million individual business owners affected by COVID-19 and support the public sector in the private-led 'Good Consumption' movement.
On the 8th, the government announced at the 4th Emergency Economic Meeting chaired by President Moon Jae-in that it would prepare and promote a 'Domestic Demand Supplement Plan through Advance Payment and Pre-purchase' with such content.
So far, the government has gradually prepared measures including 32 trillion won worth of real economy damage countermeasures, financial stability measures worth '100 trillion won + α,' and 18 trillion won worth of measures to reduce the burden on the public, including emergency disaster relief funds.
First, the government decided to provide unprecedented tax benefits for the Good Consumption movement to overcome COVID-19 damage occurring in the private sector.
For affected industries such as food and lodging, tourism, performance-related businesses, and passenger transportation, the income deduction rate for credit and check cards will be uniformly expanded up to 80% only from April to June.
The government requested a legal interpretation from the Financial Services Commission to allow advance payment of planned purchases of goods and services with corporate cards, and applies a 1% tax credit on income tax and corporate tax when prepaying or pre-purchasing goods and services from small business owners.
For about 7 million individual business owners subject to comprehensive income tax and individual local income tax filing this year, the National Tax Service and local governments will extend the payment deadline by three months from June 1 to August 31 ex officio. For COVID-19 special disaster areas and affected taxpayers, extensions of up to three months will be granted.
In participation with the private Good Consumption movement, the public sector including government ministries, local governments, public institutions, and local public enterprises plans to create demand exceeding 3.3 trillion won through advance payment and pre-purchase.
Initially, focusing on assets that can be stockpiled, the government plans to make early purchases worth 800 billion won in the first half of the year for smart devices (10,000 units) to support vulnerable students preparing for online school openings, old desks and chairs, blackboards, school supplies, quarantine and hygiene materials, medicines, and supplies and consumables necessary for safety, testing, inspection, and maintenance related to public institutions' core projects.
In the same manner, 90 billion won of business promotion expenses will be prepaid to dining establishments, and 80% (160 billion won) of remaining airline tickets for overseas travel expenses will also be prepaid. The tickets without designated routes are to be used within this year, with the balance settled by the end of the year.
Contracts for postponed or second-half planned international events, meetings, and local festivals will be signed early, with up to 80% (140 billion won) prepaid, and early contracts will be made for outsourced service fees for public institution maintenance and repair projects, spending 510 billion won in advance. The central government plans to expand the full execution of customized welfare points used in culture, leisure, and dining sectors within the first half of the year to local governments and public institutions. This cost is expected to be 190 billion won.
Additionally, to support the automobile industry facing difficulties such as demand decline, about 1,600 business vehicles planned for purchase in the second half will be purchased in the first half (50 billion won), and 150,000 barrels of domestically produced diesel and 490,000 barrels of crude oil will also be pre-purchased in the first half (31 billion won).
Some of the mask stockpile planned for purchase in the second half (supplementary budget of 70 billion won) will be contracted early in the first half, with up to 80% (45 billion won) prepaid, and 70% (50 billion won) of operating expenses for rental-type private facilities (BTL) such as national university dormitories and military facilities in the second half will also be paid in advance.
Furthermore, COVID-19 victims will be added to the credit recovery support targets of the Credit Recovery Committee, and preferential support will be provided for debt adjustment conditions such as principal repayment deferral and debt reduction. Korea Asset Management Corporation (KAMCO) will purchase up to 2 trillion won worth of debt and support debt adjustment such as repayment deferral and long-term installment repayment.
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