Former Finance Ministers: "Korean Economy Faces Complex Crisis... Corporate Tax Cuts and Structural Reforms Must Be Hastened"

[Asia Economy Reporter Park Sun-mi] Former finance ministers representing past administrations diagnosed the Korean economy as being in a comprehensive complex crisis and advised the need to pursue structural reforms in corporate tax reduction, pensions, labor, education, and fiscal policy.

On the 9th, the Federation of Korean Industries (FKI) held a special discussion titled "Economic Policy Directions Desired by the New Government," inviting former finance ministers. In his opening remarks, Huh Chang-soo, chairman of the FKI, said, "There is great concern about the perfect storm, which signifies a comprehensive complex crisis, and the structural low-growth problem is severe," adding, "In this grave economic situation, the FKI will do its best to enable companies to actively invest and create jobs."

Former finance ministers Kang Man-soo, Yoon Jeung-hyun, Park Jae-wan, and former Deputy Prime Ministers and Finance Ministers Hyun Oh-seok and Yoo Il-ho attended and offered various advice to the new government’s economic team.

Former Minister Yoon diagnosed the current economic situation as a 'comprehensive complex crisis' where low growth, high unemployment, polarization, and social conflicts have all worsened. He analyzed, "Excess liquidity has been released domestically and internationally, creating excess demand in the market, while the US-China conflict and the Ukraine crisis have caused a collapse in the global supply chain centered on raw materials, pushing inflationary pressures to their peak."

Former Minister Kang argued that lowering corporate tax rates would increase tax revenue. He stated, "Looking at past statistics, tax revenue actually increased as tax rates were lowered," and added, "In fact, a shift in perception is needed to see tax rate cuts as a long-term tax increase policy." He further noted, "Since the level of corporate tax is a key factor in investment decisions, it must be aligned with the levels of competing countries." Former Minister Yoon also said that to overcome the complex crisis, bold tax cuts should be pursued to promote corporate investment and employment, while economic actors, including labor, should share the pain by restraining excessive wage increase demands and stopping illegal strikes.

Former Minister Park proposed a national referendum on pension reform. He analyzed that reforms aimed at increasing contributions are inevitable for pension sustainability. He also argued, "Considering the significantly worsened fiscal situation compared to advanced countries, fiscal reform is urgent." He analyzed, "Most advanced countries are expected to return to a normal fiscal trajectory after the COVID-19 pandemic subsides, but Korea’s debt is continuing to increase at a rapid pace."

Former Deputy Prime Minister Yoo pointed out that populism must be most guarded against and presented five elements that should be reflected in the new government’s economic policy: ▲bold real estate measures such as supply expansion, ▲restoration of fiscal capacity by abolishing government ‘handouts’ spending, ▲promotion of labor reform aimed at visible results, ▲implementation of regulatory reforms that lead to actual outcomes, and ▲consideration of long-term fiscal stability measures for social insurance (public pensions, health insurance, employment insurance, industrial accident insurance, etc.).

Former Deputy Prime Minister Hyun said, "The new government’s economic team must understand that the policy environment has fundamentally changed." He presented ‘innovation’ and ‘equity’ as the two central axes of economic policy and suggested the conditions for successful economic reform as ▲maintaining policy consistency, ▲prioritizing the long-term benefits of the silent majority, and ▲clear division of roles and accountability within the economic team.

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