Emergency Disaster Relief Fund, Full Application and Payment Start Next Week... Controversy Remains

Online Applications Start on Card Company Websites from the 11th
Only Up to 1 Million Won per Household... Large Families Disadvantaged
Workers Below Tax-Free Threshold Cannot Receive Tax Credits Even If Donating
Criticism of Price Increases vs. Need for Basic Merchant Infrastructure

[Asia Economy Reporters Kim Hyun-jung (Sejong), Jang Se-hee] As the application for emergency disaster relief funds for general households affected by the novel coronavirus disease (COVID-19) begins on the 11th, controversies surrounding the payment criteria, donations, and usage are expected to continue for some time. The government has already finalized the supplementary budget related to the disaster relief funds, and since the payment methods and criteria have all been announced, it plans to proceed with the payments focusing on 'speed' without any separate revisions or supplements.

According to the government on the 8th, heads of all households in the country can apply for emergency disaster relief funds of up to 1 million won (for households of four or more) starting from the 11th through the online websites of their credit or check card companies. From the 18th, a week later, offline applications will also be possible at bank counters linked to the card companies.

◆Limitations of household-based payments: "Large families are disadvantaged"= The funds will be paid on a household basis, not individually, starting from the 13th. However, due to a structural limitation where households of four or more receive only up to 1 million won regardless of the number of members, ongoing controversies are expected. For example, a single-person household receives 400,000 won, a childless couple (2 persons) receives 600,000 won, which means 300,000 won per person, but a six-person family consisting of a couple with two children living with parents receives 1 million won, resulting in about 170,000 won per person. Considering that economically active household members typically separate their households, large families vulnerable in disaster situations may face reverse discrimination.

On the other hand, if a dual-income couple with one child lives separately for reasons such as schooling or commuting and pays health insurance separately, they receive more support. Although a three-person household is supposed to receive 800,000 won, if the addresses are split into a single-person household (400,000 won) and a two-person household (600,000 won), they can receive a total of 1 million won. A government official explained, "There may be perceived imbalances, but it is difficult to consider every household situation and case for payment," adding, "Since this is an urgent situation, it is important to expedite payments as much as possible."

◆Are all workers who donate eligible for tax deductions? "NO" = This relief fund accepts donations simultaneously with the application. Donation methods include ▲indicating donation intent at the time of application ▲applying to the Korea Workers' Compensation & Welfare Service after receiving the fund ▲automatic donation processing if no application is made within three months. The Ministry of Strategy and Finance, Ministry of the Interior and Safety, and National Tax Service have started establishing an 'integrated automated tax deduction system' to encourage donations. This system allows applicants to be classified as eligible for tax deductions at the time of application without separately submitting donation details or receipts during year-end tax settlement.

However, it should be noted that even workers with income may not receive tax deductions for donations during year-end tax settlement. Although the government announced a 15% tax deduction benefit for donations of the relief fund, the households eligible for deductions are limited. Workers with income below the tax exemption threshold have no tax to deduct. Among 18.58 million workers who filed year-end tax settlements in 2018, 38.9% (7.22 million) were below the taxable threshold. During this period, if a worker in a four-person household with a salary below 30.83 million won donates, the refund amount is zero. This paradoxically means high-income earners benefit more from deductions, but the government says it is difficult to prepare alternative measures.

On the 8th, marking the weekend, Namdaemun Market, Seoul's representative traditional market, showed a quiet scene due to the impact of COVID-19. / Photo by Yoon Dong-joo doso7@ (The photo is unrelated to the article content)

◆Controversy over 'price inflation' caused by disaster relief funds= Some express concerns that prices may temporarily rise once the relief funds are actually paid and usage begins. Especially since the funds are expected to be mostly used via card payments, with limited usage purposes and a deadline of August 31, merchants may raise prices. In some local traditional markets where funds have already been distributed, prices, particularly for fresh foods, have sharply increased.

Regarding this, Professor Kim So-young of Seoul National University's Department of Economics explained, "Problems arose because the funds were provided in a non-cash form with restricted usage," adding, "Price increases or arbitrary commission deductions mainly occur in traditional markets, making enforcement difficult."

There are also criticisms that minimal infrastructure for relief fund payments should have been established for market merchants before the payments. Professor Lee Eun-hee of Inha University's Department of Consumer Studies emphasized, "Traditional merchants who accept cards may face temporary difficulties in securing funds, and some do not have card terminals at all, making payments impossible," adding, "At least a system allowing relief funds to flow into the markets via cards should have been prepared in advance."