Legislative Research Office: "Compensation for Losses Should Be Retroactive Before a Bigger Shock"

Analysis Report on Current Issues... Also Presents the Need for Yeondae Fund

On the 12th, Choi Seung-jae, a member of the People Power Party, and Ryu Ho-jeong, a member of the Justice Party, held a picketing in front of the National Assembly's Industry, Trade, Energy, Small and Medium Venture Business Committee, urging the immediate enactment of the COVID-19 Loss Compensation Act. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Park Cheol-eung] A report from the National Assembly Legislative Research Office has called for the retroactive application of the COVID-19 Loss Compensation Act before a greater economic shock occurs. The report also suggested the necessity of a solidarity fund to secure financial resources. This is drawing attention as the political sphere and government are currently in a tug-of-war over whether to apply the law retroactively.

Park Chung-ryeol, a legislative researcher at the Legislative Research Office, emphasized in a recent issue analysis report that "if support after the enactment of the (loss compensation) law is insufficient for normalization, active consideration of retroactive application is necessary."

Although financial burden is inevitable, greater consideration should be given to concerns over economic deterioration. Park noted, "Calculating support funds based on new criteria for the periods when gathering bans or business restrictions were imposed and providing the difference from already paid support funds would not be administratively difficult," adding, "While consideration of the national fiscal situation is necessary, it is difficult to perfectly control the fundamental cause, the spread of COVID-19, and losses occurred due to unavoidable quarantine measures, so support for those subject to gathering bans or business restrictions is also unavoidable."

He further stated, "If substantial support is not provided in a timely manner, it would unilaterally transfer the costs that society must bear onto the affected businesses, which could lead to a larger scale of damage due to economic downturn. Before a greater shock hits the economy due to increased unemployment from business bankruptcies, a law should be enacted and concrete support measures implemented, even if it means bearing the national fiscal burden."

Although the government’s social distancing measures continue to be extended, discussions on the Loss Compensation Act in the National Assembly are slow. Both ruling and opposition parties agree on the need for retroactive application, but the government opposes it. The National Assembly’s Industry, Trade, Energy, Small and Medium Business Committee plans to hold a legislative hearing on the 25th to hear opinions from small business owners and experts, which is expected to be a turning point for whether the bill will pass within this month.

Park analyzed the French solidarity fund case in depth to draw implications applicable to Korea. The French Parliament already enacted the 'COVID-19 Emergency Response Act' and the 'Solidarity Fund Act' in March last year. The fund’s resources are provided by the state, but metropolitan local governments and local authorities can voluntarily contribute. Private donations are also accepted; insurance companies reportedly donated 400 million euros (about 546 billion KRW). The support targets are natural persons and corporations registered as business operators with tax authorities and engaged in economic activities.

Through this, about 201,000 places were supported with approximately 35 trillion KRW, with an average support amount of about 17.4 million KRW. Park said, "This is 1.7 times the maximum support amount of 10 million KRW for our gathering-restricted industries," adding, "Like France, creating a fund to use as a resource for supporting affected businesses can also be considered, and in that case, the fund’s resources should be explicitly stipulated by law."

In February, Democratic Party lawmakers Yoo Dong-su, Yang Kyung-sook, and Lee Yong-woo each proposed bills related to the Win-Win Solidarity Fund, but they have not yet been addressed in the standing committee. Democratic Party lawmaker Lee Sang-min also proposed a temporary special tax bill to overcome COVID-19 on the 17th. However, since the most urgent Loss Compensation Act is stalled, other bills have not even reached the discussion table.

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