Taxes in the Trillions... Political Circles Push for Retroactive Application of 'Loss Compensation'

Political Circle Accelerates Discussions on Loss Compensation and Vaccine Leave
KDI "Rapid Debt Increase... Efforts for Expenditure Restructuring"

A chair is surrounded by a restricted access tape. The store behind it is closed with the lights off. Photo by Moon Ho-nam munonam@

[Asia Economy Reporter Jang Sehee] Amid a sharp increase in national debt during the COVID-19 response, the political sphere is accelerating discussions on the loss compensation system and the introduction of vaccine leave. This has deepened the Ministry of Economy and Finance's concerns, as it plays the role of the nation's treasurer.

On the 16th, according to political circles and the government, the National Assembly's Industry, Trade, Energy, Venture, and Small and Medium Enterprises Committee is reviewing a bill to introduce a loss compensation system for self-employed individuals.

The proposal is for the government to directly compensate self-employed and small business owners who suffered losses due to COVID-19 quarantine measures imposed by the state. The biggest issue is whether the law will apply retroactively to damages incurred before its enactment.

Ruling and opposition lawmakers agree on retroactive application, recognizing that the disaster relief funds previously provided are insufficient to alleviate the pain experienced by small business owners. However, they differ on the timing of retroactive application. A member of the Industry Committee stated, "The Ministry of Economy and Finance opposes it citing overlapping support, but one way is to deduct the amount already supported and then provide compensation."

The Democratic Party is pushing for a legislative hearing to listen to the voices of small business owners and experts, aiming to publicize the issue of retroactive application through this process.

However, the government holds the position that retroactive application is difficult considering limited resources. Kang Sungcheon, Vice Minister of the Ministry of SMEs and Startups, said at the National Assembly's Industry Committee SME Subcommittee on the 12th, "If loss compensation amounts are calculated retroactively, some small business owners may have to have their compensation reduced, causing confusion," adding, "We need to consider fiscal and equity aspects."

Specific details such as the timing, targets, and criteria for retroactive application must be clarified to enable precise estimates of compensation scale, but so far, the required funds for loss compensation have been mentioned to range from a minimum of 2 trillion won to a maximum of 8 trillion won.

Discussions have also heated up on the bill introducing vaccine leave, which leaves open the possibility of government support for leave expenses.

On the 27th of last month, the National Assembly's Health and Welfare Committee passed an amendment to the Infectious Disease Control and Prevention Act at the bill subcommittee, allowing paid leave for those who have received vaccinations and enabling the state and local governments to support employers with paid leave costs if necessary.

In response, the Ministry of Economy and Finance recently expressed concerns to the National Assembly, citing the enormous annual fiscal burden.

According to a document submitted by the Ministry titled 'Review on Government Subsidies for Paid Vaccine Leave,' if a daily rate of 70,000 won is supported for 18.2 million workers, approximately 2.5 trillion won in annual fiscal expenditure would be required.

Due to equity issues, if expanded to all 44 million vaccinated individuals, the annual cost could reach up to approximately 6.2 trillion won. If support is provided for 1.5 days, including the vaccination day and the following day, the fiscal cost is predicted to be between approximately 3.8 trillion won and 9.2 trillion won annually.

Meanwhile, domestic and international institutions have pointed out Korea's fiscal condition. The Korea Development Institute (KDI) stated, "Recent proactive fiscal management has greatly expanded deficits and rapidly increased debt," and recommended, "We must review spending priorities and strive for expenditure restructuring." It also advised, "Strict pre-feasibility and post-performance evaluations of fiscal projects are necessary to enhance fiscal expenditure efficiency."

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