Compensation for 70% Sales Loss... Accelerated Legislation Amid Rising Closures and Unemployment

The Ministry of Economy and Finance Recently Initiated a Research Project on Loss Compensation

[Asia Economy Reporter Park Cheol-eung] The Democratic Party of Korea is emphasizing "speed" to compensate for COVID-19 business losses and to establish a coexistence solidarity fund. Considering the surge in business closures and the sharp decline in jobs, time is of the essence. Politically, with the April 7 by-elections approaching and the opposition party also insisting that the loss compensation system is urgent, related legislation is needed by next month.

Regarding the loss compensation system, multiple amendment bills to the Infectious Disease Prevention and Control Act and the Protection and Support for Small Business Owners Act have been proposed by both ruling and opposition parties. Democratic Party lawmaker Min Byung-duk even proposed the "Special Act on Loss Compensation and Coexistence for Overcoming Coronavirus Infectious Disease" last month. The core of the bill is to compensate up to 70% of sales losses for businesses subject to closure orders, and 50-60% for other affected industries. It also includes provisions to reduce or exempt rent, financial and communication costs, and utility charges by industry for affected small business owners.

From the People Power Party, four-term veteran lawmaker Kwon Young-se proposed an amendment to the Small Business Protection Act that suggests compensating at least 50% of sales losses for businesses subject to closure orders and at least 30% for businesses under restrictions. The distinctive feature is the establishment of a minimum compensation threshold.

Regarding the fund, Democratic Party lawmakers Lee Yong-woo and Yang Kyung-sook, members of the "Post-COVID Inequality Resolution Task Force (TF)," are preparing bills named the Social Solidarity Fund Act and the National Crisis Overcoming Coexistence Solidarity Fund Act, respectively. To secure funding, tax credits of around 15% are likely to be provided for private sector contributions or donations to the fund. The Democratic Party plans to consolidate these contents and present a party-level bill on the 25th.

However, the Ministry of Economy and Finance is taking a cautious stance, as it would require direct fiscal input or acceptance of reduced tax revenues. According to a review report on the amendment to the Infectious Disease Prevention Act prepared by Shin Hang-jin, a specialist at the National Assembly Health and Welfare Committee, the Ministry of Economy and Finance stated regarding the loss compensation system that "(business restrictions) are general and social constraints imposed preventively on an unspecified majority to prevent the spread of infectious diseases, and considering the purpose and intent of the law, the unspecified scope and items of losses, and the difficulty of proving losses, expanding the scope of compensation requires caution," expressing a "reluctant" position.

This appears to be the fundamental reason why negotiations with the Democratic Party are not progressing quickly. Democratic Party Policy Committee Chairman Hong Ik-pyo said in a phone interview with Asia Economy on the 16th, "We tried to have a meeting with the government before Lunar New Year, but it was delayed, so we can no longer wait," adding, "Regarding the loss compensation system, the government was asked to present a proposal, but since none has come out, the Democratic Party's proposal should be the basis." The plan is to at least propose the bill during the February extraordinary session and try to pass it in the National Assembly next month before the by-elections.

The Ministry of Economy and Finance has only recently been known to be promoting related research projects to consider the introduction of the loss compensation system. Typically, for major issues, the government proposal is followed by consultations with the ruling party before a bill is proposed, but this time, it is highly likely that the Democratic Party's independent bill will be submitted.

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