Hong Nam-ki "3.5% Cut in Vehicle Excise Tax Ending in June Extended Until Year-End" (Update)

Reduction of Individual Consumption Tax, Youth Employment Support, Extension of Shipbuilding Crisis Areas
Confirmation of Policy to Promote '9 Million KRW per Person' Special Youth Hiring Incentive, etc.

[Image source=Yonhap News]

[Asia Economy Reporter Moon Chaeseok] The government announced on the 28th that it will extend the 3.5% reduction in the individual consumption tax on automobiles, which is set to end at the end of next month, by six months until the end of the year. While an overall strategy for boosting domestic demand and economic recovery will be presented in the second half economic policy direction (Ha-gyeong-jeong) to be announced in mid-next month, the government said it will take preemptive measures to address the urgent crisis immediately.

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, presided over the 36th Emergency Economic Central Countermeasures Headquarters meeting on the 28th and stated, "The reduction of the individual consumption tax on passenger cars (from 5% to 3.5%), which has been supporting domestic demand such as expanding domestic car sales, is scheduled to end at the end of next month, so we have decided to extend it by six months until the end of the year."

With the preliminary GDP figure for the first quarter recording a better-than-expected 1.6%, indicating that the Korean economy is showing signs of recovery, the Ha-gyeong-jeong will include tasks that need to be focused on to stimulate domestic demand, investment, and exports.

However, the government plans to accelerate efforts to urgently resolve issues that must be addressed before the announcement of the Ha-gyeong-jeong, including the reduction of the automobile individual consumption tax, youth employment, and revitalization plans for industrial crisis areas.

Deputy Prime Minister Hong said, "The designation period for five special industrial crisis response areas?Ulsan Dong-gu, Geoje, Changwon Jinhae-gu, Tongyeong·Goseong, and Mokpo·Yeongam·Haenam?will be extended by two years until May 28, 2023," adding, "This measure considers the characteristic that the shipbuilding industry's order boom takes some time to translate into increased production and employment."

As resolved at the Cabinet meeting on the 18th, starting in July, the government will implement the 'Youth Employment Special Incentive' policy, which provides up to 900,000 KRW per person per year (75,000 KRW per month for up to one year) to business owners who hire regular employees aged 15 to 34 for more than six months. Additionally, employment insurance will be applied to special employment workers (SEWs) as scheduled in July without any setbacks.

The government will focus on stabilizing the 'National Employment Support System,' which provides job-seeking activity support payments of up to 3 million KRW per month for up to six months to 640,000 vulnerable employment groups, including youth, elderly, and women with career interruptions. It is also considering extending the employment maintenance subsidy period for SEWs in supported industries, which currently lasts 180 days.

Alongside pre-Ha-gyeong-jeong measures to revive the economy, discussions were held to strengthen future growth engines following the COVID-19 pandemic.

To activate youth entrepreneurship, a dedicated program will be established to support 1,000 first-time young entrepreneurs (500 for concept validation + 500 for startup support) with 10 to 20 million KRW each. In addition, a new youth startup company exclusive guarantor called 'Youth Tech Star' with an annual scale of 200 billion KRW was created.

Furthermore, the government has prepared the 'National Ultra-High Performance Computing Innovation Strategy,' aiming to rank fifth in the world by 2030. The plan is to elevate the ultra-high performance computer infrastructure at the national center from its current 21st place to 5th place globally by 2023. Twenty-four core technologies, including CPU and mainboard, will be identified to secure over 80% of the technological capability compared to the world’s top in each field. Up to 20% of computing resources will be preferentially allocated to enterprises by 2025, and related academic departments will be established to nurture experts.

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