17th National Assembly Planning and Finance Committee 'Tax Subcommittee' Closed Meeting
Both Ruling and Opposition Parties Oppose... Temporary Relaxation of Post-Management for Employment Reduction Expected to Be Revised
[Asia Economy Reporter Jang Sehee] The government's 'Employment Increase Tax Credit' benefit submitted to the National Assembly is likely to be revised. Members of the ruling and opposition parties on the National Assembly's Planning and Finance Committee opposed the government's proposal, citing inconsistencies with the policy direction and fairness issues between companies that maintained employment and those that did not.
On the 18th, according to the Ministry of Economy and Finance and the National Assembly's Planning and Finance Committee, the tax subcommittee of the committee decided to reconsider the government's plan to temporarily ease post-management of employment reduction under the Employment Increase Tax Credit. This followed repeated criticisms from lawmakers that the plan contradicts the original purpose of introducing the employment increase and lacks tax fairness. The ruling and opposition parties agreed to have the government partially revise the content and reconsider it at the March National Assembly session.
In December, the government announced reforms to the Employment Increase Tax Credit system through the '2021 Economic Policy Direction.' Under the current system, if the number of regular employees decreases within two years compared to the first year the credit was received, the tax credit amount corresponding to the reduced number must be repaid. However, the government proposed to continue providing the credit benefits by considering companies with reduced employment as maintaining employment. This measure was taken in consideration of companies struggling due to COVID-19. The scale of tax credit amounts through this system is expected to reach 713.4 billion KRW in 2019, 1.2813 trillion KRW in 2020, and 1.3103 trillion KRW in 2021.
However, members of the Planning and Finance Committee from both parties argue that the content should be revised considering the government's policy direction and tax fairness. Rep. Choo Kyung-ho of the People Power Party pointed out the tax fairness issue between companies, saying, "If companies that have struggled to maintain employment and those that have not receive the same tax benefits, the market momentum that is struggling to maintain employment may worsen." Rep. Park Hyung-soo of the People Power Party also emphasized, "Providing benefits to companies that did not maintain employment contradicts the original purpose of the introduction," adding, "It is necessary to keep the tax credit as is but expand support through other means."
Rep. Yoon Hee-sook of the People Power Party said, "The government's overall direction for the employment market is to maintain or increase employment as much as possible," and added, "While recovering the tax credit amount for the reduced number of employees, it is necessary to consider deferring the payment timing." Amid President Moon Jae-in's emphasis on personally striving to improve private sector employment conditions, providing tax benefits to companies with reduced employment contradicts the policy direction.
Rep. Kim Ju-young of the Democratic Party stated, "Supporting companies that reduced employment with tax money during difficult times is inappropriate," and added, "The overall direction should be to increase employment."
In response, the government is reportedly discussing partial revisions. A government official said, "It seems necessary to review once again the easing of recovery measures only for companies with reduced employment."
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