Questions linger over funding needed to implement Moon’s campaign promises
SEOUL (Yonhap) -- The government needs 178 trillion won (US$157.7 billion) to boost welfare and carry out President Moon Jae-in's other key campaign promises, his policy advisory panel said Wednesday, amid lingering questions on how to raise the large sum.
A blueprint unveiled by the State Affairs Planning Advisory Committee showed that the government would set aside 77.4 trillion won for welfare -- a key part of Moon's campaign agenda -- over the next five years.
The committee also estimated that the government would also need 42.3 trillion won for investment for future and income-based growth. Moon is seeking to address income disparities and boost economic growth by creating jobs and increasing household revenue. Such developments, the chief executive stressed, will fuel private consumption and lay the foundation for sustainable growth.
The blueprint said the government would raise 95.4 trillion won over the five-year period through spending cuts while raising 82.6 trillion won through tax earnings. It said the government could raise 60.5 trillion won out of the 82.6 trillion won through a "natural" rise in tax revenues as the country's economy grows and people are paid more.
The government collected a total of 69.9 trillion won in taxes in the January-March period alone, up 5.9 trillion won from a year earlier, according to the Ministry of Strategy and Finance.
Still, it remains unclear whether the trend of increased tax revenue could continue throughout 2022 when Moon's single five-year term ends.
In 2014, the government's tax revenue shortfall reached 10.9 trillion won, as the national economy grew at a slower pace than previously expected.
Reflecting this, Baek Ehung-gi, a senior economist at the state-run Korea Development Institute, is critical of the government's move to raise extra funds through restructuring expenditures.
"There will probably be no big problems this year as more taxes are being collected." the analyst said. Baek, who teaches economics and finance at Sangmyung University in Seoul, predicted that the government will have no choice other than to raise taxes to carry out Moon's campaign agenda.
"A tax hike is something that is not going to be popular," he said.
Government insiders said policymakers will discuss tax issues at a special committee to be formed later this year before reporting to the president and the parliament next year.
On the campaign trail, Moon hinted at corporate and income tax hikes, and a removal of tax exemptions and benefits to secure funding to push through his agenda.
On where the extra earnings will be spent, the president vowed to create some 800,000 public jobs during his five-year term, grant an allowance to young jobseekers and offer public residence to newlyweds for affordable rent.
In June, Finance Minister Kim Dong-yeon said that he has no immediate plans to raise income and corporate taxes.
Currently, South Korea imposes a 22-percent corporate tax on companies that post taxable earnings of over 20 billion won, with 20 percent for firms with 200 million won-20 billion won in earnings.
Source: Yonhap News Agency