"No Need to Legalize Loss Compensation if Disaster Relief Fund Calculation System Is Established"

Joseyeon "Unable to Help Revenue Recovery for Severely Affected Industries... Need for Tailored Policies"

On December 28 last year, as the number of COVID-19 confirmed cases increased and strict social distancing measures continued, the difficulties of self-employed people deepened. The restaurant street in Jongno 2-ga, Seoul, appeared quiet. Photo by Kang Jin-hyung aymsdream@

[Sejong=Asia Economy Reporter Moon Chaeseok] A government-funded research institute expressed a negative stance on the legalization of COVID-19 loss compensation for self-employed individuals and others. The reason is that if a precise calculation system is established, legalization is unnecessary.

Jang Woo-hyun, a research fellow at the Korea Institute of Public Finance, stated in the report titled "Analysis of the Economic Impact of COVID-19 Using Credit Card Data and Suggestions for Improving Disaster Relief Fund Design," published in the April issue of 'Fiscal Forum' on the 28th, "If a damage support calculation system is properly designed, it can fully or mostly include loss compensation for the damage amount," adding, "there is no need to legalize loss compensation."

Source: Korea Institute of Public Finance

He analyzed 11,742,751 credit card basic data collected through Korea Credit Bureau (KCB) and others, concluding that "since the nationwide disaster relief fund payment policy did not sufficiently help the sales recovery of industries severely affected by COVID-19, additional tailored policies may be necessary."

By industry, even after the nationwide disaster relief fund was distributed in May last year, most industries still showed slow sales recovery similar to before the payment. Analyzing the sales change rate compared to the same month of the previous year in June last year for industries with more than 300 self-employed franchise stores, 18 out of the 20 lowest-performing industries in April of the same year (90%), except for professional services (+3.31%) and Korean restaurants (+0.20%), remained among the bottom 20 industries in June as well.

Source: Korea Institute of Public Finance

The intensity of damage also varied by region. Among 249 cities, counties, and districts last year, 147 saw a decrease in the average sales of self-employed individuals compared to the previous year, while 102 actually experienced an increase.

Source: Joseyeon

While tailored loss compensation measures by industry and region are necessary, he believed there is no need to proceed to legalization. Current discussions on disaster relief fund payments are divided between the opinion of "compensating those who suffered losses due to government-imposed gathering bans and business restrictions" and the view of "helping those who find it difficult to overcome the disaster regardless of government policies." If the former (loss compensation) is followed, it is sufficient to accurately establish the damage support calculation criteria and consider loss compensation within that 'framework.' He added, "On the contrary, legalizing it may reduce the flexibility of the system, potentially preventing precise distribution of support funds to those severely affected."

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