Government Considers Expanding Deductions and Low-Interest Loans Instead of Retroactive Application... Party and Government Go Their Own Way

Ruling Party and Government Disagree on Retroactive Compensation
Considering Additional Measures to Prevent Duplicate Support

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] The government, which has shown differences with the ruling party over the retroactive application of loss compensation for small business owners and self-employed individuals, has begun to actively consider deductions and low-interest loans instead of retroactive measures. It is anticipated that the confrontation with the government will intensify depending on the figure elected as the leader of the Democratic Party of Korea early next month.

On the 26th, a senior government official said, "We plan to proactively consider expanding deductions and low-interest loans for small business owners," adding, "If compensation is provided for past losses, there could be disputes over fairness and equity." Since support has already been provided through multiple disaster relief funds, overlapping support is impossible, so the government is considering various additional measures.

The government plans to design policies in a direction that is highly effective after hearing experts' opinions through external research. There are two ways to expand deductions: broadening the scope of the existing Yellow Umbrella Deduction support or increasing the deduction amount, and creating a new small business owner deduction program.

Currently, the Yellow Umbrella Deduction is operated through the central association, designed so that those with a total salary of 70 million KRW or less who pay deduction contributions of 3 million KRW or less quarterly can receive deductions up to 5 million KRW based on business income amount. Even if a new small business owner deduction program is created, small business owners wishing to receive deductions in the future must pay money into the fund monthly or quarterly.

The government official continued, "Since sales vary by industry, past support amounts are also different," explaining, "Loss compensation for small business owners is a part supported through legislation, so it must be calculated accurately." It is physically difficult to classify and calculate the sales damage of over 6 million small business owners and self-employed individuals by industry. Also, since there are many small business owners, it is difficult to cross-check all the supporting documents that verify sales.

In addition, plans to expand low-interest loans (1.9%, fixed interest rate) for small business owners are also under review. The government is also examining whether to extend the small business low-interest loan program, which ends in September, and plans to expand the loan scale.

However, within the Democratic Party, there is a strong sentiment that retroactive application of loss compensation must be implemented.

If the ruling party and government persist in their current "my way" stance, the shock will increase and actual compensation will inevitably be delayed. Yang Eui-won-young, a member of the National Assembly's Industry, Trade, Energy, Small and Medium Venture Business Committee, said, "Within the party, there is an opinion that loss compensation for small business owners should be applied retroactively from when the government began business restriction measures," adding, "If overlapping support from disaster relief funds is an issue, it seems possible to deduct the amounts already provided."

If the ruling party and government step back and reach an agreement, the retroactive application timing could be postponed, or the issue could be resolved through activating deductions and extending low-interest loans.

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