Nara Salrim Research Institute: "Yoon Administration Passes 100 Trillion Won Tax Revenue Shortfall to Next Government"
Experts: "No More Tax Cut Competition in Politics"
"Tax System Should Be Revised to Promote Investment in Innovation Over Unearned Income"
The Democratic Party of Korea is preparing to shift its tax and fiscal policy direction once the new administration takes office. There is growing support for reversing the tax cut policies that were frequently cited as the fundamental cause of recurring tax revenue shortfalls during the Yoon Seokyeol administration, and for strengthening taxation on unearned income.
On the 29th, Democratic Party lawmakers Oh Kiheung, Kim Namgeun, and Kim Younghwan, along with Cha Kyugeun, Policy Committee Chair of the Jae Guk Innovation Party, held a forum at the National Assembly titled "No More Tax Cuts: The 100 Trillion Won Bill Left by Yoon Seokyeol, Solutions for the Next Government."
At the event, Representative Oh Kiheung explained, "Recently, our office circulated a letter to 192 opposition lawmakers, not just those from the Democratic Party, urging them not to engage in a competition to cut taxes." He stated, "The concern was that, despite economic growth, tax revenues are declining and the tax base is not expanding." He further explained, "If both the Democratic Party and the People Power Party start competing to cut taxes ahead of the presidential election, fiscal conditions will worsen, so the intent is to put an end to this tax cut competition." He expressed concern about the political circles engaging in a tax cut race ahead of the presidential election.
On the 29th, a forum titled "No More Tax Cuts: The 100 Trillion Won Bill Left by Yoon Seokyeol, Solutions for the Next Government" is being held at the National Assembly. Photo by Naju Seok
Specifically, regarding the argument that labor income tax should be cut because its total amount exceeds that of corporate tax, Representative Oh said, "It is not something to be outright rejected as incorrect, but there are concerns about whether it is appropriate at this time." He pointed out, "It needs to be verified whether labor income tax collections are excessive compared to the inflation rate and other factors." On the issue of inheritance tax, he commented, "While expanding the spouse deduction is necessary for rationalizing the system, caution is needed when it comes to abolishing the inheritance tax altogether." Oh emphasized, "Within the Democratic Party, we must be wary of tax policy tilting excessively toward tax cuts in relation to the presidential election."
Representative Kim Namgeun stated, "The next government will need to inject fiscal resources to revitalize the economy and foster new industries," adding, "To support this, it will be unavoidable to discuss strengthening the fiscal base." He argued, "At the very least, it is essential to restore the tax cut measures pursued under the Yoon Seokyeol administration." He continued, "There will be discussions about raising additional tax revenue," and suggested, "We should first set the overall fiscal direction and then discuss comprehensive tax policy based on that foundation." Representative Kim Younghwan pointed out, "Korea's fiscal capacity is deteriorating to its worst state," and criticized, "The current economic situation is essentially the result of policy failures by the Ministry of Economy and Finance, which is at the core of fiscal management."
At the forum, Sangmin Lee, Senior Research Fellow at the Nara Salrim Research Institute, stated, "The government attributes the tax revenue shortfall to the aftermath of the 'global complex crisis,' but tax cuts also had a significant impact." He explained, "Tax cut policies such as those on corporate tax, comprehensive real estate tax, and income tax played a major role in reducing tax revenues." Lee evaluated, "The Park Geunhye administration expanded the tax base, increasing tax revenues by 10.6 trillion won during its term and by 21.8 trillion won for the subsequent Moon Jaein administration." He noted that the Moon Jaein administration secured 9.9 trillion won in fiscal resources over its five-year term and handed over 6.8 trillion won to the Yoon Seokyeol administration.
In contrast, the Yoon Seokyeol administration's tax cut policies from 2022 to 2024 reduced fiscal resources by 83.7 trillion won (on a five-year term basis) and are expected to cause a tax revenue shortfall of 100 trillion won for the next administration.
Regarding the issues of fiscal and tax revenue decline, Deokhyun Ryu, Professor of Economics at Chung-Ang University, proposed that the next administration should "focus in the short term on economic recovery and revitalization following the 12·3 Emergency Martial Law, and in the medium term, shift from a sound fiscal stance to one of fiscal sustainability." He added, "In the long term, tax and fiscal reforms should aim to address inequality, reform the fiscal structure, and provide a vision for future generations and innovation in the Korean economy."
Hyundong Kim, Professor of Business Administration at Paichai University, pointed out, "Although the political sphere is heating up with a 'tax cut competition' ahead of the upcoming presidential election, this is not an appropriate option for the next administration to consider." He emphasized, "Given that the actual income tax burden is low, tax cut policies such as easing income tax are not justifiable," and added, "Pursuing the abolition of the financial investment income tax and the separate taxation of dividend income, without clear evidence of a correlation between dividends and stock prices, will only weaken income redistribution."
Se Eun Jung, Professor at Chungnam National University, stated, "Tax policies should be strengthened so that capital is channeled into investment and innovation rather than unearned income, and public infrastructure and active industrial policies should be promoted." She called for "policy directions that actively invest in welfare infrastructure such as care and healthcare."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
