Ruling Party and Government at an Impasse Over Retroactive Application of 'Loss Compensation'

Legislative Hearing Held
Political Circles: "Just Push the Legislation"... Government: "Implementing Support of Over 40 Trillion Won"

Officials from the Korea Association of Travel Agents held a press conference on the morning of the 25th in front of the National Assembly in Yeouido, Seoul, urging the enactment of a compensation law for losses related to the travel industry and the guarantee of their right to survival. (Image source=Yonhap News)

[Sejong=Asia Economy Reporter Moon Chaeseok] As the first legislative hearing on loss compensation is held on the 25th, the political circles and the government remain at odds over whether to apply the law retroactively to damages incurred before the enforcement of the Loss Compensation Act. The ruling party, which holds the key, predominantly supports "a certain level of retroactive application," while policy authorities maintain the stance that "the loss compensation system will be implemented, but retroactive application is difficult." Small business owners are urging not only for retroactive application but also for increased support levels such as tax benefits.

According to political and government sources, from 1 p.m. on the 25th, the National Assembly’s Industry, Trade, Energy, Small and Medium Venture Business Committee (SanJaWi) will hold a 'Legislative Hearing on the Loss Compensation Act.' The hearing is expected to focus on the issue of retroactive application of the Loss Compensation Act. High-ranking government officials, including Choi Sang-dae, Director of the Budget Office at the Ministry of Economy and Finance, and Jo Joo-hyun, Director of the Small Business Policy Office at the Ministry of SMEs and Startups, will participate as witnesses. As reference persons, small business owners from the food service industry, coin karaoke rooms, study cafes, and travel businesses, as well as experts from academia and the legal field, will attend. Although legislative hearings have been held three times in total?once in 2013 regarding the revision of the Amnesty Act and twice in 2014 concerning the prevention of card personal information leaks?this is the first time a hearing is held on loss compensation.

Regarding the contentious issue of 'retroactive application,' among the discussion parties?political circles, government, and stakeholders?only the government maintains the position that "application is difficult." The government upheld this stance until just before the meeting. A senior government official stated, "Basically, the government’s position is that retroactive application is undesirable for three reasons: overlapping support, fairness, and technical difficulties such as reconciliation during execution." In particular, the issue of 'overlapping support' for the travel and entertainment industries has emerged as a key point. Although these sectors suffered significant damage due to the COVID-19 crisis, the argument is that their operations were not restricted by COVID-19 quarantine guidelines. It is known that, according to a simulation by the Democratic Party, entertainment establishments accounted for more than half of the total compensation amount. Currently, about 20 bills related to loss compensation are pending in the National Assembly.

In political circles, the general atmosphere is that "if only the ruling party agrees, the law enforcement can be pushed through." In this regard, on the previous day, former Democratic Party leader Lee Nak-yeon reversed his February statement during a discussion titled 'COVID-19 Small Business Crisis and Solutions' held in Yeouido, Seoul, saying, "A certain degree of retroactivity has become an unavoidable stage," and "It is not easy to reconsider retroactive application." Also, the National Assembly Legislative Research Office stated the day before that "if support only after the enactment of the (loss compensation) law is insufficient for normalization, active consideration of retroactive application is necessary." A member of the opposition party in the SanJaWi explained, "The government says retroactive application is difficult for three reasons, but if the National Assembly pushes through about 20 related loss compensation bills, the government will have no choice but to implement them. No matter how much the government opposes, if the ruling party has the legislative will and passes the bills, the issue will be resolved, and the opposition party has advocated for implementation from the start."

Furthermore, small business owners attending the hearing are expected to demand measures such as Japan and Germany’s ▲rapid compensation for small businesses ▲emergency operating fund loans ▲tax payment deferrals ▲rent support ▲and full-time support measures. Among these, the most sensitive issue is 'tax payment deferral.' While there is a national consensus on the need for cash support such as 'universal disaster relief payments,' even for those who are not small business owners, the possibility of affecting the tax system is a different matter. The government authorities are not currently considering this. The government plans to maintain support totaling 45 trillion won, including 14 trillion won in cash support such as the existing Sae Hope Fund, Buttress Fund, and Buttress Fund Plus, and 30 trillion won in financial loan support. A senior government official said, "Last year, Germany provided 6 trillion won in cash support to small businesses, but Korea’s support of 14 trillion won was by no means a low level."

Meanwhile, 115 lawmakers from both ruling and opposition parties held a 'Joint Press Conference of Ruling and Opposition Lawmakers Urging the Loss Compensation Act' three hours before the hearing, asserting that "loss compensation should be applied retroactively to small business owners and self-employed persons who suffered business disruptions due to administrative orders for COVID-19 quarantine." They also called for measures such as ▲sufficient ultra-low-interest loans (restart funds) and ▲the establishment of an all-government task force (TF) for credit recovery of bankrupt individuals. They added, "The financial authorities should abandon departmental selfishness that only aims to fill their own coffers and release relief rice to save the starving people."

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