"Difficulty in Submitting Budget Proposal" Disagreement
Opposition Also Moves Against "Benefits for High-Income Earners"
Sung Il-jong, Policy Committee Chairman of the People Power Party (right), is holding a press conference on the direction of budget review at the National Assembly in Yeouido, Seoul, on the morning of the 8th. On the left is Representative Lee Cheol-gyu. [Image source=Yonhap News]
[Asia Economy Reporter Lee Hyun-joo] The ruling party's plan to include an expansion of the credit card and cash income deduction limits in next year's budget to ease the burden on people's livelihoods has encountered obstacles just one day after the announcement. Adjusting the income deduction limits is a matter of tax law revision, and including it in the budget has sparked disagreements within the ruling party. Critics argue that the announcement was premature, especially given the ruling party's minority status in the National Assembly, making legislation difficult.
According to the People Power Party on the 9th, after Policy Committee Chairman Sung Il-jong and ruling party floor whip Lee Cheol-gyu announced the 'Shopping Basket Income Deduction,' which increases the deduction limit for credit card and cash receipt usage by 1 million won each the previous day, some within the party pointed out that including income deduction items in next year's budget is itself excessive.
An anonymous People Power Party official criticized, "Where is the precedent for including a law revision matter in the budget review direction?" and added, "The party's Policy Committee and Budget and Accounts Committee did not consult and irresponsibly made statements." A National Assembly Budget and Accounts Committee official also said, "The ruling party only mentioned 'supporting' income deductions, so it is still difficult to say whether it will proceed as a revision bill or how financial support will be provided."
The shopping basket income deduction strongly resembles indirect budget support as it reduces taxpayers' burdens. The Policy Committee said the day before that it would push for a budget increase of 766.7 billion won related to this, but strictly speaking, it is related to a decrease in tax revenue. Since it is subject to tax law revision, it must be handled by the National Assembly's Strategy and Finance Committee rather than the Budget and Accounts Committee. This is why there are complaints that the Budget and Accounts Committee "irresponsibly made statements without consultation." In response, a People Power Party Budget and Accounts Committee expert said, "It is to benefit salaried workers who pay a lot of taxes in this era of high inflation," and added, "Since higher prices lead to more value-added tax revenue, it is quite feasible."
However, this atmosphere within the ruling party is expected to work against them even more in the current minority situation. To expand the income deduction limits, the Restriction of Special Taxation Act must be amended, but the opposition party is unlikely to cooperate. A Democratic Party official from the Strategy and Finance Committee said, "We agree on the broad direction to stabilize the livelihood economy, but we need to specifically review how to secure the funding," and added, "The income deduction benefits are likely to go to high-income earners." This implies a strong possibility of opposition since the benefits tend to favor the wealthy as the deduction limits increase.
There are concerns that the handling of various tax law revision bills, including the Restriction of Special Taxation Act, will be delayed as the relevant standing committee, the National Assembly Strategy and Finance Committee, continues to struggle with forming subcommittees. The biggest challenge in forming subcommittees is the Tax Subcommittee, which discusses tax bills. On the morning of the same day, Park Dae-chul, chairman of the Strategy and Finance Committee, said regarding the subcommittee formation, "There is no agreement yet, but we are trying."
The full meeting of the Strategy and Finance Committee held that afternoon will include the agenda of forming subcommittees. Although negotiations between the ruling and opposition parties continued until the morning, no agreement was reached. However, the urgent Budget and Accounts Fund Review Subcommittee is likely to be formed soon.
Shin Dong-geun, the opposition floor whip of the Strategy and Finance Committee, plans to hold a press conference immediately after the full meeting if there is no progress in forming the subcommittees. A staff member from his office explained, "Even if the standing committee's subcommittees are not properly formed, budget reviews and other tasks must proceed, so this will be an opportunity to explain how they will be conducted."
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