Government Begins Research Project on Loss Compensation System... Key Issue is 'Assessing the Scale of Loss'

[Sejong=Asia Economy Reporter Son Seonhee] The government has launched a research project to introduce a COVID-19 'loss compensation system.' This system is designed for the state to compensate small business owners and self-employed individuals for damages caused by COVID-19 quarantine measures, and the key is to accurately determine the scale of losses that will serve as the basis for compensation.

On the 14th, the Ministry of Economy and Finance reportedly commissioned a research project to refer to in designing the system for the introduction of the loss compensation system. The project aims to examine various issues such as the target recipients, scale and method of support, criteria, and funding plans. It is expected that the government or the National Assembly will proceed with legislation based on the review of the research report in the future.

The ruling party and the government have reportedly reached a consensus to include only a principle clause in the relevant law stating that the state will compensate for losses caused by COVID-19 quarantine measures, while leaving detailed provisions to enforcement ordinances or rules. This is to allow for more flexible and adaptive support. The most likely approach is to amend the Act on the Protection and Support of Small Businesses, while amendments to the Infectious Disease Control and Prevention Act and the enactment of special laws are also being discussed.

The core issue is to accurately determine the scale of losses for small business owners and the self-employed. Currently, Prime Minister Chung Sye-kyun mentioned on the 27th of last month that "the spirit of the Constitution is to compensate for losses based on (operating) profits rather than sales," so operating profit is likely to be the standard. Support may be provided differentially at specific rates such as 30-70% based on past operating profits.

However, considering that the income reporting cycle is one year, it is currently difficult to accurately calculate operating profit losses using only existing tax information. It is not easy to precisely identify losses during the 'specific period' of quarantine measures. Accordingly, the Ministry of Economy and Finance is reportedly considering shortening the income reporting cycle to monthly, quarterly, or semiannual periods.

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