Corporate Tax Bracket Reduced by 1%p Each · Comprehensive Real Estate Tax Basic Deduction Increased from 600 Million to 900 Million (Summary)

Corporate Tax Brackets Reduced by 1 Percentage Point
Police Bureau Cuts Personnel Information Unit Operating Expenses by 50%
Public Rental Housing Project Increased by 660 Billion Won

[Asia Economy reporters Naju-seok and Kim Young-won] The ruling and opposition parties agreed on the budget bill for next year on the 22nd. The contentious corporate tax will be reduced by 1 percentage point for each current tax base bracket, and the budgets for the Ministry of the Interior and Safety's Police Bureau and the Ministry of Justice's Personnel Information Unit will be cut by half for operating expenses. The financial investment income tax will be deferred for two years, and the stock capital gains tax criteria will remain unchanged.

On the day, Joo Ho-young, floor leader of the People Power Party, Park Hong-geun, floor leader of the Democratic Party, and Deputy Prime Minister for Economy Choo Kyung-ho held a press conference at the National Assembly to announce the agreement on next year's budget and major issues.

According to the agreement signed by the floor leaders of both parties, the ruling and opposition parties reached a compromise by each stepping back slightly on the issues they had previously insisted on. Regarding corporate tax, the parties went one step further than the 1 percentage point reduction in the top tax rate mediated by the Speaker of the National Assembly, agreeing to reduce the current tax base brackets by 1 percentage point each. Initially, the ruling party demanded a 3 percentage point reduction, while the opposition party opposed any corporate tax cuts.

For the Police Bureau and Personnel Information Unit, although the Speaker's mediation proposed allocating the budget through contingency funds, the final agreement was to cut operating expenses by 50%. In particular, both sides agreed to prepare alternatives when revising the Government Organization Act for these bodies, which had been controversial for violating current laws.

Regarding the budget, the opposition party's demand for KRW 352.5 billion for local love gift certificates was included. This partially reflected the opposition's request. Floor leader Park explained at a separate press briefing, "Initially, the Democratic Party wanted KRW 705 billion and insisted on budgeting for next year as well, but finally, half of the KRW 705 billion requested by the Democratic Party was reflected, resulting in KRW 352.5 billion being budgeted."

Additionally, for the public sale housing loan project, the government's original budget proposal was maintained, and KRW 660 billion was added for the public rental housing jeonse loan project.

[Image source=Yonhap News]

Both parties also agreed to increase the budget for public senior citizen jobs and support for cooling/heating and rice costs at senior centers (KRW 95.7 billion). Furthermore, KRW 40 billion was added to the strategic crop direct payment project to stabilize rice prices.

The Democratic Party's demand to abolish the reduction of basic pension for couples was not reflected in this budget but will be discussed further later.

Along with corporate tax, related tax laws accompanying the budget were also agreed upon that day. The financial investment income tax will be deferred for two years through behind-the-scenes negotiations between the parties, but the major shareholder criteria for stock capital gains tax will be maintained. Initially, the government and the People Power Party advocated raising the major shareholder threshold from the current KRW 1 billion to KRW 10 billion. The securities transaction tax will be gradually reduced.

The comprehensive real estate tax exemption amount will be KRW 900 million (KRW 1.2 billion for single-home households), and the basic tax rate will be maintained for up to two houses regardless of whether the area is a regulated zone. For three or more houses, progressive taxation will apply from a tax base of KRW 1.2 billion. The tax rate ranges from 2.0% to 5.0%. Floor leader Park said, "The People Power Party wanted to abolish the progressive system for owners of three or more houses, but the Democratic Party said they could not accept it for ultra-wealthy people owning three or more houses, so the final opinion was reflected."

Regarding the business succession deduction, the mid-sized company sales standard will be raised from the current KRW 400 billion to KRW 500 billion, and the deduction limit will be increased to a maximum of KRW 60 billion.

A special account for higher and lifelong education support will be introduced for three years on a temporary basis. Next year, KRW 200 billion in additional general account transfers and KRW 1.5 trillion in education tax revenue budget will be allocated as resources.

The ruling and opposition parties also agreed to proceed smoothly with the state investigation into the Itaewon disaster through consensus on current issues.

Sunset laws are scheduled to be handled at a plenary session on the 28th. Related laws include the National Health Insurance Act, National Health Promotion Act, Freight Truck Transportation Business Act, Labor Standards Act, Korea Electric Power Corporation Act, and Korea Gas Corporation Act. However, the direction of amendments to these laws has not been agreed upon. Floor leader Joo explained, "We decided to handle them if an agreement is reached." Floor leader Park also said, "The relevant standing committees and policy chiefs will discuss, and if not resolved, the floor leaders will negotiate on the issues and handle them at the plenary session once settled."

Although the ruling and opposition parties succeeded in agreeing on the budget bill, the final agreement was reached 20 days after the legal deadline of the 2nd. The parties tentatively agreed to process next year's budget by 6 p.m. on the 23rd. This will prevent concerns about provisional budgets or the opposition party unilaterally revising the budget bill.

Floor leader Joo said regarding this budget process, "With the idea that the national budget should be executed predictably, we met dozens of times to narrow and coordinate opinions. Although late, we were able to pass the budget tomorrow. The People Power Party is a minority party, but we wanted to reflect the government's policies and philosophy in the budget as much as possible. The Democratic Party is the opposition but the majority party, so it was difficult to narrow differences, but fortunately, it passed by agreement." When asked if he consulted with the presidential office on the agreement, he said, "The Deputy Prime Minister for Economy, who represents the government side, agreed, and I understand there was consultation within the government during the process."

Floor leader Park said, "We have approached this with a sense of responsibility to save people's livelihoods and the economy amid a complex economic crisis. Although there were differences between the ruling and opposition parties on issues including tax laws and the overall budget, we reached a grand compromise with the thought that we should not cause further inconvenience to the people and that it is important to cooperate so that the state investigation can proceed fully as it has now begun in earnest."

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