[Yoon Administration Supplementary Budget] Choo Kyung-ho: "Price Stability is Top Priority... Various Tax Support Measures Being Prepared" [Q&A]

Deputy Prime Minister Choo Kyung-ho to Announce Supplementary Budget on 12th
59.4 Trillion Won Allocated... 36.4 Trillion for Loss Compensation and Quarantine
"20 Trillion More Corporate Tax Collected... Utilizing Excess Tax Revenue"
"New Government Firmly Committed to Fiscal Soundness"
"Small Business Owners Will Face Greater Hardship Without Immediate Support"

Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho is holding a joint briefing with related ministers on the second supplementary budget for 2022 at the government Seoul office briefing room on the 12th.
[Photo by Yonhap News]

Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho stated, "Price stability is our top priority, so we are currently preparing various tax support measures," expressing his commitment to ensuring that the supplementary budget of 59.4 trillion won will not impact inflation.

At the second supplementary budget government joint briefing held at the Government Complex Seoul on the 12th, Deputy Prime Minister Choo said, "While preparing the supplementary budget, we were concerned about how to minimize the burden on prices."

The government announced a supplementary budget of 59.4 trillion won on the same day. Excluding 23 trillion won transferred to local governments, the general expenditure allocated by the government for support to small business owners, strengthening quarantine measures, and stabilizing livelihoods amounts to a total of 36.4 trillion won.

Deputy Prime Minister Choo emphasized, "To maintain a sound fiscal stance, we decided to repay about 9 trillion won in national bonds," adding, "The new government is firmly committed to fiscal soundness."

Of the 36.4 trillion won in general expenditures, the government plans to finance 21.3 trillion won using excess tax revenues. Regarding the astronomical excess tax revenues, Deputy Prime Minister Choo said, "Corporate tax collections until March have increased by at least 20 trillion won compared to last year," and "Capital gains tax is also being collected more than last year."

Below is the Q&A session with Deputy Prime Minister Choo and others.

Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho (second from right) is holding a joint briefing with related ministers on the 2nd supplementary budget for 2022 at the government Seoul office briefing room on the 12th. [Image source=Yonhap News]

- Deputy Prime Minister, in your inaugural speech, you mentioned prioritizing price and livelihood stability. At the same time, do you think it is appropriate to release a budget of 59 trillion won from a macroeconomic management perspective? Also, how do you plan to prepare for inevitable inflationary pressures?

▲ (Deputy Prime Minister Choo Kyung-ho) Our economy is currently facing two major challenges. One is economic recession, and the other is rapidly rising prices. Therefore, when preparing this supplementary budget, we were concerned about how to minimize the impact on prices.

The fiscal funds allocated for support to small business owners this time are mostly transfer expenditures. Transfer expenditures generally have a very weak impact on prices compared to regular government spending.

Additionally, by providing emergency financial support to small business owners, especially vulnerable groups, we are helping to offset the decline in their real purchasing power caused by rising prices. Since price stability remains our top priority, we are separately reviewing various tax support measures. We are also currently considering structural issues such as expanding government stockpiles and improving distribution-related sectors.

- Recently, GDP growth rates are expected to be revised downward, and economic slowdown is anticipated, yet there is much surprise at the large amount of excess tax revenues. What are the causes of repeated errors in tax revenue forecasts? Also, if the excess tax revenues are not secured as predicted this year, will the government have to borrow again?

▲ (Deputy Prime Minister Choo Kyung-ho) Tax revenue forecasts and economic projections are often inaccurate in hindsight. Several factors influenced our revision of tax revenue forecasts this year. One is corporate tax. Corporate tax collections until March have increased by about 20 trillion won compared to last year. There is also a system of advance payment for corporate tax, where about 50% of the corporate tax due for the year is prepaid in the first half. This means an additional 10 trillion won will come in, resulting in confirmed tax revenues of around 30 trillion won plus alpha.

Regarding capital gains tax, we initially projected poor tax revenue performance this year compared to last year. However, due to rising official property prices and land compensation for the 3rd New Town development, capital gains tax collections have actually exceeded last year's. These factors combined led us to revise tax revenue upwards by just over 50 trillion won this year. We will conduct a more precise review again in June, July, and August.

- The Democratic Party has even called for a state audit regarding this excess tax revenue. What is your position on this?

▶ (Deputy Prime Minister Choo Kyung-ho) The supplementary budget bill passed the Cabinet meeting today and will be submitted to the National Assembly tomorrow. From next week, the National Assembly will review the supplementary budget bill, and we will provide detailed explanations and respond accordingly during that process.

- How many businesses are expected to receive the 10 million won loss compensation?

▲ (Cho Joo-hyun, Vice Minister of SMEs and Startups) It is currently difficult to predict the exact number. The supplementary budget plans to provide 23 trillion won in loss compensation to 3.7 million businesses, based on data analysis of businesses that received disaster relief funds.

We can explain which businesses are eligible to receive the maximum amount of 10 million won. The individual business must have annual sales of at least 400 million won. The business must have experienced a sales decline of 60% or more during the designated period. Additionally, the industry to which the business belongs must have suffered a critical impact from COVID-19, with an overall sales decline rate of 40% or more. Even if the business is not in such an industry, if it is a medium-sized enterprise directly affected by government quarantine measures, it can receive this amount.

- One of the key differentiators of the new government from the previous one is its emphasis on fiscal soundness. However, questions have been raised about whether the strong commitment to fiscal soundness is genuine, given that the government has prepared the largest supplementary budget ever immediately after taking office.

▲ (Deputy Prime Minister Choo Kyung-ho) This is indeed a challenging point. The new government is firmly committed to fiscal soundness. However, small business owners have suffered severe damage from COVID-19 and are currently in great distress. Therefore, full and adequate loss compensation is necessary, but how to secure the funding for this was a major challenge.

We secured 7 trillion won through painful expenditure restructuring while preparing the funds. Additionally, to maintain a sound fiscal stance, we decided to repay about 9 trillion won in national bonds. Including existing surplus funds, we expect to repay about 12 trillion won in additional national bonds this year. Our commitment to a sound fiscal stance remains unchanged. If we do not urgently support small business owners affected by COVID-19 now, they will become more vulnerable, which will later lead to additional welfare expenditure demands.