"Tax Deferral Unprecedented and Illegal" Growing Conflict Between Ruling Party and Government Over Quarantine Support Fund

The Ruling Party's Funding Plan Puts Tax Authorities in Dilemma
"Technically Difficult as Well"

[Asia Economy Reporters Kim Hyunjung, Son Seonhee, Oh Jooyeon, Jeon Jinyoung] Following the financial authorities, the tax administration authorities responsible for actual tax collection have also expressed opposition to the ruling party’s plan to provide quarantine support funds (disaster relief funds). The Democratic Party of Korea’s idea is to secure funding by deferring tax payments, but this method is unprecedented and could lead to legal controversies. However, the Democratic Party is not changing its plan to distribute the funds early next year, signaling a potential intensification of conflicts between the party and the government.

[Image source=Yonhap News]

According to the tax administration authorities on the 10th, the Democratic Party’s proposal to secure funding for quarantine support funds through “tax deferral” faces administrative and technical obstacles. The reasons for deferring tax payment deadlines are specified in the National Tax Collection Act (Article 13), but none of the reasons proposed by the Democratic Party meet these criteria. According to the article, tax payment deadlines can only be postponed if the taxpayer is recognized as unable to pay due to reasons such as disaster, theft, business losses, illness, or death. Otherwise, deferral is possible only if the government deems the reason “acceptable.” A government official stated, “Except for the specified reasons, the law must be amended for (tax deferral) to be possible.” Another official also opposed, saying, “This is unprecedented, and there was no consultation whatsoever with the tax administration authorities.”

The Democratic Party cites comprehensive real estate tax and fuel tax as targets for deferral, but this is also technically difficult. A tax administration official said, “The comprehensive real estate tax is effectively a local tax that must be 100% transferred to local governments as grants,” adding, “There is a legal schedule to issue payment notices by the end of this month, so it could cause administrative confusion.” Regarding fuel tax, individual businesses can apply for deferral and have it reviewed, but the government cannot postpone payments for reasons like those proposed by the Democratic Party at the national level.

Tax deferral also leads to losses in the national treasury. Another government official said, “Taxes are collected within the legally prescribed deadlines, and interest effects can be expected from that, so giving up on that part causes losses to the national treasury.” Hong Namki, Deputy Prime Minister and Minister of Economy and Finance, reiterated his opposition at the National Assembly Budget and Accounts Committee plenary session the day before, saying, “It is difficult to secure 25 trillion won (for nationwide quarantine support funds) or 50 trillion won (for small business loss compensation).”

However, the Democratic Party is maintaining a firm stance. The name of the “nationwide quarantine support fund” officially announced the day before was changed on the same day to “nationwide daily recovery quarantine support fund,” and it was announced that the fund would be used to support the purchase of masks, an essential quarantine item for daily recovery. On the morning of the same day at the Central Election Countermeasures Committee meeting, Floor Leader Yoon Hojoong explained the reason for providing the quarantine support funds, saying, “With the implementation of With-Corona, the main subject of quarantine is shifting from the state to individuals.” He continued, “We have been wearing masks for the past 500 days, and just the cost of masks is about 250,000 won,” explaining, “This idea was conceived with the intention of supporting the people in quarantine along with daily recovery.” This implies that support such as mask purchase costs is necessary because confirmed cases may surge during the transition to With-Corona.

Accordingly, despite concerns about losses to the national treasury, the Democratic Party is highly likely to proceed with securing funding through tax payment deferral. However, regarding the specific payment amount, timing, funding, and procedures, the ruling party, opposition, and government plan to conduct sufficient consultations to find common ground.

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