'Extraordinary Fiscal Management Measures Proposed by the Opposition'... Jeong Seong-ho Introduces 'Tax Expenditure Management Act'

Last Year, National Tax Reductions Reached 71 Trillion Won
A More Comprehensive Management Plan Needed for Tax Expenditures
Tax Revenue Supplementation Measures Should Be Included When Extending Tax Expenditures

A bill has been proposed to manage the expanded tax expenditures, which have grown to a scale of 70 trillion won. Attention is focused on whether it can put a brake on the ever-expanding tax expenditures, which have been stretching like a rubber band.

On the 9th, Jeong Seong-ho, a member of the Democratic Party of Korea, announced through a press release that he had proposed the "Tax Expenditure Management Act" for the systematic management of tax expenditures.

Tax expenditures refer to the government's tax reductions in specific sectors to achieve policy goals, and the scale of national tax reductions alone reached about 71 trillion won last year. Considering that the government's total budget expenditure last year was 656 trillion won, it amounts to about 11 trillion won. However, since there has been no mid- to long-term operation so far, it has been cited as one of the causes of fiscal leakage.

Jeong Seong-ho, Democratic Party of Korea lawmaker

The proposed amendment adds a plan to manage the total amount and reduction rate of tax and local tax expenditures to the ‘National Fiscal Operation Plan,’ which is prepared every five years to manage national finances from a total perspective including not only budgetary expenditures but also tax expenditures. It also expands the scope of the tax expenditure budget statement from the current three years to five years to strengthen the mid- to long-term management system. In short, it aims to manage tax expenditures systematically and integratively.

In addition, to improve the current operation of the tax expenditure system, where the initial national tax reduction period is set but is practically automatically extended upon the ministry's request, the government will be required to submit to the National Assembly the necessity for continuation, the timing for achieving policy goals, and tax revenue supplementation measures when applying for sunset extension, so that a thorough review can be conducted. The intention is to make the extension of tax expenditures more stringent.

Jeong said, "Tax expenditures are invisible government spending, and more systematic and strict management is necessary for sustainable national fiscal operation," adding, "The prompt passage of the amendment will contribute to enhancing the transparency and accountability of tax expenditure operations."

This bill consists of five proposals: two amendments to the National Finance Act, two to the Restriction of Special Taxation Act, and one to the Local Tax Special Cases Act.