[Yoon Administration's First Livelihood Measure] No.1 Project to Ease 'Everyday Grocery Prices for Ordinary People' (Comprehensive)

Choo Kyung-ho: "We Will Reduce Cost Burdens Across the Entire Process of Food and Food Material Imports, Production, and Consumption"
Zero Tariffs Applied to 14 Food and Industrial Raw Material Items... Reducing Pressure on Import Cost Increases
Eliminating VAT on Imports of Popular Foods Like Coffee and Cocoa Beans to Lower Costs by 9%, Government Supports 70% of Flour Price Increase
Encouraging Launch of 5G Mid-Tier Plans in Q3 to Ease Communication Cost Burden

[Asia Economy Sejong=Reporter Kim Hyewon] The first livelihood measure of the Yoon Seok-yeol administration focused on alleviating the price burden of the "common people's shopping basket." This was mainly done through tariff reductions and value-added tax (VAT) exemptions. The intention is to support the livelihood economy by lowering the import costs of everyday food items and ingredients such as pork, cooking oil, and coffee, thereby increasing the real purchasing power of low-income groups. However, as the domestic consumer price inflation rate approaches 5%, it seems difficult to avoid controversy over policy contradictions, with one side pushing forward a supplementary budget (supplementary budget) of 62 trillion won that could stimulate prices, while the other side introduces livelihood measures to reduce the price burden.

On the 30th, at the first Economic Ministers' Meeting chaired by Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho under the Yoon administration, the "10 Emergency Livelihood Stabilization Projects for the Stability of Common People's Lives" were announced, focusing on three major areas: food, living expenses, and housing. This was based on the judgment that the rising prices of imported raw materials and processed foods are rapidly spreading to overall living costs, and that the burden of living and housing costs on low-income households is increasing amid high inflation and a trend of rising benchmark interest rates. Deputy Prime Minister Choo stated, "To stabilize living and food prices, we will promote the alleviation of cost burdens of food and food ingredients throughout the entire process from import-production-consumption."

First, at the import stage, tariffs on 14 items of food and industrial raw materials will be eliminated to reduce upward pressure on import costs. For seven food raw materials such as cooking oils (soybean oil, sunflower seed oil) and pork, an additional zero tariff allocation will be applied until the end of the year, and the allocation volume will be expanded. Allocation tariffs mean applying a tariff rate lower than the basic tariff rate on imported goods. Allocation and adjustment tariffs on seven industrial raw materials, such as naphtha, which have a large industrial ripple effect or are rising in price, will be applied and reduced until the end of the year. For example, for pork priced at $1,000, applying a zero tariff reduces the import price from 1,563,000 won to 1,250,000 won, a decrease of about 20%. This is achieved by applying a 0% tariff rate instead of the current 22.5-25% on a total import volume of 50,000 tons of pork belly and processed pork.

The VAT exemption card, which has a significant effect on lowering consumer prices, was also played. VAT on imports of coffee and cocoa beans, which are popular food items, will be temporarily exempted until next year, reducing costs by about 9%. Importing coffee beans priced at $1,000 without VAT allows for a price reduction potential of about 9.1%. In addition, the exchange rate applied when determining the tariff taxable price will be changed from the "foreign exchange selling rate" to the "base exchange rate," reducing import costs by about 1%.

VAT (10%) on simply processed food products individually packaged in bottles and cans, such as kimchi, doenjang (fermented soybean paste), gochujang (red chili paste), soy sauce, and salted seafood, will also be exempted until next year to induce price drops. The inflation rates for kimchi and doenjang last month were 10.6% and 16.3% year-on-year, respectively, factors that increase the burden on the common people's shopping basket. A budget of 60 billion won will also be invested to expand support for discount coupons for agricultural, livestock, and fishery products (10,000 won per person, up to 20% discount).

Furthermore, the government will reduce producers' raw material cost burdens to lower price increase pressures at the distribution stage. The government will support 70% of the increase in flour prices to minimize price hikes and provide low-interest loans at 1% for feed purchase costs for livestock farmers. The tax exemption limit for duty-free agricultural products will be raised by 10 percentage points until the end of next year. For fishery workers' duty-free diesel, a fuel price-linked subsidy will be temporarily provided for five months. This subsidy covers 50% of the portion exceeding 1,100 won per liter until October.

To reduce living expenses, the interest rate on student loans for the second semester will be frozen at 1.7%, the same level as the first semester, and the 30% reduction in individual consumption tax on passenger cars will be extended for six months. The benefit of the passenger car individual consumption tax reduction has been repeatedly extended since July 2018.

[Image source=Yonhap News]

To ease the burden of communication costs, the government plans to encourage the launch of a 5G mid-tier plan in the third quarter. Currently, the fee structure is divided into 55,000 won for 10-12GB and 69,000-75,000 won for 110-150GB plans. The aim is to create a mid-tier plan around 60,000 won to reduce communication costs, but cooperation from the three major telecom companies is necessary. A 20 trillion won "Safe Conversion Loan" for low-income households will be prepared to refinance high-interest and variable-rate mortgage loans into low-interest and fixed-rate loans, and emergency living support funds of up to 1 million won per low-income household (four-person household) will be newly provided.

Under bipartisan agreement, the total scale of the Yoon administration's first livelihood stabilization measures, including the livelihood support measures included in the second supplementary budget passed by the National Assembly plenary session the day before and the government's previously announced one-point measures such as the fuel price-linked subsidy for compact cars, amounts to 3.1 trillion won. Deputy Prime Minister Choo said, "Recent high inflation is largely influenced by external factors, so some degree of endurance is inevitable," and added, "Please join us in stabilizing prices, considering that individual price and wage chain increases riding on the inflation trend cause a vicious cycle of price increases, ultimately resulting in difficulties for both the parties involved and society as a whole." The government plans to announce the economic policy direction reflecting the new government's national philosophy next month, following this livelihood stabilization measure.