[Q&A] Hong Nam-gi: "No Tax Increase Considered When Drafting the Supplementary Budget"

Reluctance to Nationwide Disaster Relief Fund, "Maximize Effectiveness with Selective Support"
"4th Relief Fund Focused on Strengthening Blind Spots," Emphasized

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, is briefing on the 2021 supplementary budget at the Government Seoul Office in Jongno-gu, Seoul, on the 2nd. From left to right: Lee Jae-gap, Minister of Employment and Labor; Deputy Prime Minister Hong; Kwon Deok-cheol, Minister of Health and Welfare; Kwon Chil-seung, Minister of SMEs and Startups. Photo by Moon Ho-nam munonam@

[Asia Economy Reporter Moon Chaeseok] Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, stated on the 2nd, "The issue of tax increases was not considered at all while preparing this supplementary budget of 15 trillion won."

At the '2021 Supplementary Budget Detailed Briefing' held at the Government Seoul Office on the same day, Deputy Prime Minister Hong said, "The issue of tax increases requires a very important consensus among the public."

Regarding the nationwide disaster relief fund, he expressed reluctance, saying, "From the fiscal authorities' standpoint, it is a way to maximize the support effect by focusing intensively and thickly on the affected groups rather than providing universal support as much as possible."

Below is a Q&A session with Deputy Prime Minister Hong, Minister of Employment and Labor Lee Jae-gap, Minister of Health and Welfare Kwon Deok-cheol, and Minister of SMEs and Startups Kwon Chil-seung.

- Deputy Prime Minister Hong emphasized thicker support and filling blind spots in the fourth round of support funds, but the ruling party demanded more, and ultimately decided to provide up to 5 million won to businesses subject to gathering bans. Do you consider this sufficiently thick support? Although the total scale is 19.5 trillion won, the pure disaster relief fund excluding quarantine and existing budgets is 10.9 trillion won, which is less than the first nationwide disaster relief fund of 14.3 trillion won. How do you evaluate the overall scale?

▲(Deputy Prime Minister Hong) One of the key focuses this time was concentrated support for the affected groups, and the second was thicker support and filling blind spots. I would like to say that the government made every effort to expand the support targets and increase the scope of support within the maximum possible range. For example, the support targets for the Buttress Fund, which was supported in the previous 9.3 trillion won support plan, were 1 million, 2 million, and 3 million won, but this time, it was more detailed in five stages from 1 million to 5 million won, and the support amount per unit was also increased.

The total support plan amounts to 19.5 trillion won. The supplementary budget is 15 trillion won, and 4.5 trillion won is related project support from the existing budget. The 4.5 trillion won in the existing budget is essentially no different from disaster relief funds.

- The Blue House and the ruling party seem to take it for granted that nationwide support payments will be made once COVID-19 subsides. Concerns about fiscal deterioration are growing due to the issuance of 10 trillion won in national bonds this time. What is your position on nationwide support payments?

▲(Deputy Prime Minister Hong) First, while preparing this supplementary budget, we discovered and utilized about 5 trillion won of existing available resources to support the approximately 15 trillion won supplementary budget measures, and issued about 9.9 trillion won in deficit national bonds. Regarding the nationwide support fund, rather than focusing on what the next supplementary budget will be at this stage, I think we should concentrate on having the supplementary budget bill announced today pass the National Assembly quickly and prepare for its swift execution. The next plan will be decided comprehensively considering the progress of quarantine, economic recovery, and fiscal conditions if necessary. However, from the fiscal authorities' standpoint, I would like to emphasize that intensive and thick support for the affected groups rather than universal support as much as possible is the way to maximize the support effect.

- As national debt increases due to disaster relief payments and large-scale national projects, calls for tax increases are emerging mainly in the political sphere. What is your stance on the tax increase debate?

▲(Deputy Prime Minister Hong) As I mentioned earlier, the issue of tax increases was not considered at all while preparing this 15 trillion won supplementary budget. The issue of tax increases requires comprehensive consideration of various factors such as the level of welfare to be maintained and the extent of public burden that can be tolerated, so I believe that a public discussion process and the formation of public consensus are absolutely necessary. However, in the short term, the administration is doing its utmost to implement various support measures to secure revenue. For example, strengthening taxation on undeclared income, reorganizing tax exemption and reduction systems, and other maximum possible administrative measures to expand the tax base are being carried out. This also includes improving the efficiency of fiscal expenditures.

- The emergency employment measures will create 270,000 jobs. Existing employment measures were often criticized for being simple part-time public work. Are there any improvements in this regard?

▲(Minister Lee) The emergency employment measures include many projects such as hiring incentives to increase private sector hiring capacity, job skills development for youth and women, and employment support. Of the 275,000 jobs, not all are direct jobs. The government fully funds 148,000 direct jobs. The rest are employment incentives or startup support projects to help private sector hiring. Even for direct job projects, considering the decrease in employment mainly among temporary daily workers in face-to-face service industries due to the third wave of COVID-19, the job projects were organized focusing on jobs that are necessary in relation to quarantine, safety, and childcare but are not created by the private sector.