[Weekly Review] Ultra-Super Budget of 558 Trillion Passed in Plenary Session... Jointly Owned Single-Home Couples Also Eligible for Deduction

National Debt Increases to 956 Trillion Won... National Debt-to-GDP Ratio at 47.3%
Option to Choose Joint Spouse Name for Comprehensive Real Estate Tax Deduction
Thanks to Exports, Q3 Economic Growth Rate Records 2.1%

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] The National Assembly has finalized next year's budget at a record high of 558 trillion won. The budget includes 3 trillion won in emergency disaster relief funds to respond to the novel coronavirus infection (COVID-19), as well as 672 billion won for public rental housing. Additionally, with the passage of amendments to the Comprehensive Real Estate Tax Act and Income Tax Act in the plenary session of the National Assembly, jointly owned single-home couples will now be able to choose the elderly and long-term holding deduction benefits to reduce their comprehensive real estate tax burden. The top tax rate applied to ultra-high-income earners with an annual income of over 1 billion won will be raised to 45%.

◆ 558 Trillion Won Ultra-Super Budget, National Debt at Record High = On the 2nd, the National Assembly held a plenary session and passed next year's ultra-super budget of 558 trillion won. This is the first time in six years that the National Assembly has passed the budget within the constitutionally mandated deadline. Major increases include 3 trillion won for the third disaster relief fund and 900 billion won for the COVID-19 vaccine budget. Housing stability received 700 billion won, climate change response 300 billion won, and employment stability and care/childcare support 300 billion won each. National debt will increase from 952.5 trillion won to 956 trillion won based on the government's main budget. The national debt-to-GDP ratio will also soar from 46.7% to 47.3%, up 0.6 percentage points. The size of deficit bonds to be issued next year will reach 91.9 trillion won. Accordingly, the total deficit bonds issued under the Moon Jae-in administration are expected to reach 259.4 trillion won.

◆ Jointly Owned Homes Can Also Choose Comprehensive Real Estate Tax Deduction... Top Income Tax Rate Raised to 45% = According to the Ministry of Economy and Finance on the 5th, jointly owned single-home couples will be able to choose either the current method of receiving a 600 million won deduction each and paying tax on the portion exceeding 1.2 billion won in official property price, or, like single-home owners, pay tax on the portion exceeding 900 million won while receiving elderly and long-term holding deductions. Recently, as the number of homes with official property prices exceeding 1.2 billion won increased due to rapid house price rises, the number of jointly owned single-home taxpayers subject to comprehensive real estate tax has increased, and it was found that when the official property price exceeds a certain level, the tax burden is heavier than that of single-name single-home owners, causing controversy. The top tax rate applied to ultra-high-income earners with an annual income over 1 billion won will be raised to 45%. Furthermore, the taxation of virtual assets such as cryptocurrencies as other income will be implemented from January 2022. Other income earned from selling virtual assets will be aggregated annually and taxed separately at a 20% rate, with income up to 2.5 million won exempt from tax. The individual consumption tax on liquid-type electronic cigarettes will remain unchanged. Although the government intended to raise the tax rate from the current 370 won per 1ml of nicotine solution to 740 won, the National Assembly's Budget Committee decided to maintain the current rate.

◆ Q3 Economic Growth Rate 2.1%... 0.2%p Higher Than Preliminary Figure = The Korean economy, which had been retreating due to the COVID-19 shock, rebounded by over 2% in the third quarter. The Bank of Korea announced on the 1st that the preliminary GDP growth rate for the third quarter of this year was 2.1%. Previously, the quarterly growth rates were -1.3% in Q1 and -3.2% in Q2, recording consecutive negatives. The growth rate exceeded the preliminary figure due to a 16% increase in exports in Q3 compared to Q2, centered on automobiles and semiconductors. Imports also increased by 5.6%, mainly in crude oil and chemical products, and facility investment rose by 8.1%, focusing on machinery and transportation equipment. On the other hand, construction investment decreased by 7.3% due to the contraction of civil engineering construction. Private consumption failed to rebound due to sluggishness in semi-durable goods such as clothing, remaining at the same level (0%) as in Q2. Real Gross National Income (GNI) also increased by 2.4% compared to Q2, surpassing the GDP growth rate. After declines of -0.8% in Q1 and -2.2% in Q2, the economy rebounded in Q3.

◆ November Exports Turn Positive Again After One Month = Last month, South Korea's exports rebounded despite adverse factors such as fewer working days compared to the previous year. It is the first time in two years that both total export value and average daily export value increased simultaneously. On the 1st, the Ministry of Trade, Industry and Energy announced in the 'November Export-Import Trends (Customs Clearance Basis Preliminary Figures)' report that last month's exports increased by 4% year-on-year to 45.88 billion USD. After rebounding in September, seven months after the COVID-19 outbreak, exports declined in October but rebounded again last month. The number of working days was 23, 0.5 days fewer than 23.5 days in the same month last year. By item, exports of 10 out of 15 major items increased, including semiconductors and automobiles. Semiconductor exports rose 16.4% year-on-year, marking five consecutive months of positive growth and three consecutive months of double-digit growth rates. Display (21.4%) and wireless communication devices (20.2%) recorded their highest export values and growth rates this year. Automobiles increased for three consecutive months for the first time in a year. Last month, they recorded 3.99 billion USD, the second-highest performance this year following October, which exceeded 4 billion USD.

This content was produced with the assistance of AI translation services.