With "Eliminating Basic Pension Couple Reduction Would Cost 1.6 Trillion Won"... Ruling and Opposition Parties Face Steep Challenges in Budget Solution

Corporate Tax Rate Cut by 1% Point Deemed Insufficient for Corporate Competitiveness
Song Eon-seok: "Remaining Issues Must Reach Comprehensive Agreement"

Joo Ho-young, floor leader of the People Power Party, is attending the party floor strategy meeting held at the National Assembly on the 16th and delivering opening remarks. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporters Kum Boryeong, Kwon Hyunji] The People Power Party (PPP) has listed the reasons why it could not accept the parliamentary speaker’s mediation proposal on next year’s budget bill, stepping up pressure on the Democratic Party of Korea (DPK). The ruling and opposition parties remain at an impasse not only over the biggest issue of corporate tax cuts but also on the reduction of the combined basic pension for couples, the budgets for the Ministry of the Interior and Safety’s Police Bureau and the Ministry of Justice’s Personnel Information Management Unit, cuts to the budget for sale housing and promotion of rental housing, expansion of the scope of business succession tax deductions, and the postponement of the financial investment income tax (Fin-Invest Tax).

Joo Ho-young, floor leader of the PPP, said at a party strategy meeting held at the National Assembly on the 16th, “Although the budget is overdue beyond the regular session and there is some urgency, even so, it is difficult to agree just for the sake of agreement on matters that are unacceptable in light of our principles and the country’s economic and fiscal situation.”

Regarding the biggest issue in the budget negotiations, the “3 percentage point cut in the highest corporate tax rate,” the PPP took a tough stance. The day before, National Assembly Speaker Kim Jin-pyo proposed a 1 percentage point cut as a mediation plan, and the DPK expressed willingness to accept it, but the PPP judged it insufficient from the perspective of corporate competitiveness. Floor leader Joo explained, “In a situation where a war for overseas direct investment is underway due to the corporate tax issue, a mere 1 percentage point cut is far from enough to signal to overseas investors or capital fleeing China that South Korea is a good and competitive country for business.”

Deputy Floor Leader Song Eon-seok added, “The corporate tax cut is intended to simplify the tax rate system, aiming to reduce the current four-tier system to three tiers. Considering that China maintains a single tax rate system, simplifying the tax rate system is an urgent task, but if the cut is only 1 percentage point, the purpose of simplifying the tax rate system cannot be achieved.”

The PPP also raised strong voices over the reduction of the combined basic pension for couples and the budgets for the Ministry of the Interior and Safety’s Police Bureau and the Ministry of Justice’s Personnel Information Management Unit. They maintain the current 20% reduction when both spouses receive the basic pension. Floor leader Joo criticized, “If the combined basic pension deduction for couples was truly necessary, it should have been started during their administration, but now they want to implement a project costing 1.6 trillion won annually. It does not fit at all within the overall pension framework or structure.” They also asserted that the Police Bureau and the Personnel Information Management Unit are legitimate state agencies. Deputy Floor Leader Song said, “Since these agencies are currently operating normally, their budgets should be reflected and executed, but if authorized institutions later determine their illegality, budget execution should be immediately suspended with attached opinions to ensure the right direction.”

The PPP also mentioned other remaining contentious issues. Deputy Floor Leader Song said, “The DPK’s claim to cut all budgets for local love gift certificates and sale housing while greatly increasing rental housing remains unchanged. Why should our youth be forced to live only in rental housing instead of their own homes as government policy?” He criticized. The DPK is demanding an increase of 705 billion won in the local currency budget, but the PPP is reluctant, arguing that the effect on local economic revitalization has disappeared.

There is also no agreement on the scope of business succession tax deductions and the criteria for major shareholders regarding capital gains tax on stock related to the Fin-Invest Tax. Deputy Floor Leader Song said, “It is very regrettable that we must reach a comprehensive agreement on these issues together, so our party finds it difficult to accept the parliamentary speaker’s proposal immediately and had to defer it for further review.”

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