[Q&A] Choo Kyung-ho: "Will Reconsider Beer and Takju Taxes Linked to Inflation"

Press Conference at Government Sejong Complex on the Afternoon of the 9th

Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho stated on the 9th, "Introducing the specific tax system on beer and takju in 2020 was a good move, but the part linking it to inflation needs to be reconsidered." In 2020, a specific tax was introduced on beer and takju to reflect the consumer price inflation rate, aiming to curb price increases that exploit this system.

Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho is answering reporters' questions at a press briefing held in the Ministry of Economy and Finance press room, Central Building, Government Complex Sejong, on the afternoon of the 9th.

At a press briefing held at the Central Building of the Government Complex Sejong on the same day, Deputy Prime Minister Choo said, "Regarding the part that links (beer and takju tax rates) to inflation, there is a sense of concern that it is 'inappropriate.'"

He explained, "Recently, with inflation rising by 5%, when there is a factor of about 15 won increase in beer prices due to taxes, for example, it is not just a matter of raising the beer price from 1,000 won to 1,015 won by 15 won. Because consumer prices can ride on the inflation increase, it can become a factor that leads to price hikes, so there is a fundamental need to reconsider this."

Deputy Prime Minister Choo suggested abolishing the inflation linkage system and instead having the National Assembly set appropriate tax amounts. He emphasized, "When there is a mood for price increases riding on inflation, the market tends to raise prices by several hundred won under the pretext of a 5 or 10 won tax increase. Rather than linking the specific tax to inflation, the National Assembly should set the tax amount according to volume at certain points in time."

The following are key excerpts from the Q&A session between Deputy Prime Minister Choo and the press corps.

- What is your assessment of the current inflation situation?

▲ Inflation levels remain high, causing ongoing difficulties for the public and people's livelihoods. However, the inflation rate has gradually slowed down since it recorded 6.3% in July last year, showing a slight rebound from 5.0% in December to 5.2% in January this year. In February, it was recorded at 4.8%, showing a 0.4 percentage point decrease. I believe the slowdown in inflation will continue for the time being. Therefore, unless there are special adverse weather conditions or unexpected factors in March, the inflation rate is expected to be lower than February's 4.8%. The Governor of the Bank of Korea forecasted it to be below 4.5%, and we also expect March inflation to be in the low to mid-4% range, not significantly different from the Bank of Korea's forecast. In the second quarter of this year, I think inflation could be much lower, possibly in the 3% range.

- What is the policy direction regarding electricity and gas rates?

▲ Since last year, I have consistently stated that electricity and gas rates will be determined by comprehensively considering international energy prices, the financial status of the relevant public enterprises, and the burden on the public. The accumulated operating deficits of public enterprises will be gradually resolved over several years.

In late January this year, due to cold weather and accumulated factors for rate increases, the heating cost burden on our citizens became very heavy, and many voices of concern were confirmed. Therefore, when deciding future electricity and gas rates, we must comprehensively consider the aforementioned factors along with inducing energy conservation and promoting energy use efficiency.

When determining rates, we will take these aspects into account comprehensively and carefully consider and review when and how to decide on public utility rates, especially electricity and gas rate increases.

- There are concerns about tax revenue shortages. What is your view?

▲ Tax revenue in January was not good. Overall, I think the tax revenue situation this year will be quite tight. January's tax revenue was poor, and especially the first quarter of the first half of the year is expected to be unfavorable. This is related to the overall economy and asset market conditions. The overall tax revenue situation is very tight, but how tight it will be is something we need to judge by observing the asset market and economic conditions going forward. At this moment, it is too early to provide specific details beyond saying 'tax revenue will be tight.'

- What will be included in the comprehensive measures to revitalize domestic demand, and when will the measures be announced?

▲ Recently, exports, especially semiconductor-centered, have been very sluggish, and the reopening effect in China has not directly translated into exports, so most exports are sluggish. Especially with difficulties in the livelihood sector, there has been a sense of concern and calls for revitalizing consumption. This concern is shared in Yongsan as well, and we are working on it. Regarding specific content, once we gather opinions from related ministries and various sectors and finalize the content and direction, we will introduce it.

- What about measures for low birth rates?

▲ I think measures will be prepared based on a comprehensive diagnosis of the currently implemented related policies. It is time for a thorough review of which low birth rate measures have been effective and which do not fit the current reality. Effective measures need to be developed. However, I will explain the specific methodology when the government announces it in the future.

- Are you considering an additional supplementary budget?

▲ Currently, we are not considering any supplementary budget at all. Supplementary budgets are basically judged comprehensively after a certain portion of this year's budget has been executed and the economic situation is reviewed. I think it is too early to talk about supplementary budgets now.

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