[Yeouido Interview] Ryu Seong-geol "Delivery Price Linkage System Must Not Violate Principle of Private Autonomy"

<기사제목>Secretary of the Planning and Finance Committee Appointed Chair of the Special Committee on Stabilizing the People's Economy, Leading Frontline Negotiations with the Opposition
Corporate Tax Top Rate Higher than OCED
Economic Growth and Job Creation Essential for Building a Welfare State

Ryu Seong-geol, member of the People Power Party./Photo by Yoon Dong-ju doso7@

[Asia Economy Reporters Lee Ji-eun and Geum Bo-ryeong] It has been nearly a month since the first regular session of the National Assembly under the Yoon Seok-yeol administration began. However, economic reform bills promoted by the government and ruling party in a situation where the opposition holds the majority are being 'adrift' due to the overwhelming 169-seat opposition. How can the Yoon Seok-yeol administration's economic pledges be realized against the opposition that is flooding pro-labor and anti-business bills? We heard specific plans from Ryu Seong-gil, a member of the People Power Party who serves as the ruling party's secretary on the National Assembly's Planning and Finance Committee and chairman of the Special Committee on Livelihood Economic Stability.

- The domestic and international environment surrounding the Korean economy is unusual. How do you assess the current situation?

= The economic situation is difficult. When only our country's economy was struggling, for example during the International Monetary Fund (IMF) crisis, we had to overcome it ourselves, but now it is not such a situation. Since we are greatly influenced by external environments, we also need to observe what overseas is doing. The basic approach to economic management has changed from the administration of the past five years to the current government. Since it cannot be changed overnight, systems and laws must be revised.

- The current government is pursuing fiscal austerity and corporate tax reductions. The reality is that there is strong opposition from the large opposition party.

= We have agreed on urgent matters to be handled first. The proposal to raise the comprehensive real estate holding tax (종부세) threshold for first-home owners from 1.1 billion KRW to 1.4 billion KRW was opposed by the Democratic Party, which suggested at least 1.2 billion KRW, but that was also rejected. Discussions on the 종부세 issue are ongoing, but October 20, when the tax payment notices are printed, is the deadline. However, since the Democratic Party has not accepted it, a new proposal has been made. Since this was mentioned during negotiations, I cannot disclose the details. Still, if the Democratic Party refuses, we must consider that negotiations may not conclude by November.

- How do you view the 종부세 burden on single-home households?

= The proposal to raise the basic deduction from 1.1 billion KRW to 1.4 billion KRW is intended to exclude those who were not subject to the 종부세 last year but are this year. That number is about 93,000 people. Since the fair market value ratio has been lowered from 100% to 60% after the Yoon Seok-yeol administration took office, the actual tax amount to be paid will also decrease significantly.

- The supply price linkage system is being promoted in the political arena. Although both ruling and opposition parties seem to voice the same opinion, their nuances appear different.

= The supply price linkage system has been discussed for a long time and has pros and cons. Also, there is the fundamental principle of 'private autonomy.' Article 119, Paragraph 1 of the Constitution states that 'The economic order of the Republic of Korea shall be based on respect for the freedom and creativity of individuals and enterprises.' If the supply price linkage system is made mandatory and compulsory, it may conflict with the principle of a free market economy. However, among small and medium-sized enterprises and small business owners, there are those who struggle if raw material price fluctuations are not reflected in supply prices, so there is a clear practical need to alleviate their burden. Allowing voluntary adoption of the standard contract is acceptable, but whether it can be made compulsory must be considered. This has been discussed in the special committee, and there are differences of opinion even among ministries.

Ryu Seong-geol, member of the People Power Party./Photo by Yoon Dong-ju doso7@

- Are you in favor of making it compulsory?

= The Constitution establishes the economic order based on the principle of a free market economy. If problems arise, regulations can be imposed, so it is not a matter of doing it uniformly or not at all. If there is a problem, adjustments can be made, but it should not violate the principles of private autonomy and contracts, which is my personal view. So it is difficult. Another point is that consideration must be given not only when raw material prices rise but also when they fall. Some bills only consider situations where raw material prices increase. The impact when prices decrease must also be examined thoroughly.

- The passage of bills to ease the corporate tax burden does not seem easy.

= Our highest corporate tax rate is 25%. Considering that the average among OECD countries is 21.2%, it is relatively high. Lowering corporate tax does not immediately lead to investment. However, the clear fact is that if other countries lower their rates but we keep ours high, investment will decrease. Therefore, since the start of the 21st National Assembly, the first individual bill proposed in 2020 was the 'Partial Amendment to the Corporate Tax Act' to simplify the corporate tax brackets. Among OECD countries, we have the most tax brackets. The purpose was to simplify them and increase investment. This is also related to welfare. The most important thing regarding our economy is welfare. To improve the quality of life for 51.04 million Korean citizens and create a welfare state where people live happily, economic growth is necessary, and jobs must be created during the growth process. To create jobs, companies must invest. We need to create an environment where companies can invest. Therefore, we propose cutting corporate taxes, easing regulations, and supporting research and development (R&D).

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