Next Year's Budget at a Crossroads Ahead of Statutory Deadline... Will a Last-Minute Grand Compromise Emerge?

Floor Leaders Seek Compromise Amid Standoff
Key Issues Include Regional Gift Certificates and Reserve Funds
Budget Bill Could Be Delayed Until December 9 if No Agreement Reached

Floor leaders of the ruling and opposition parties are seeking a last-minute compromise ahead of the statutory deadline (December 2) for passing next year's budget bill. With the 9th nationwide local elections scheduled for June 3 next year, both sides are acutely aware of regional public sentiment, drawing attention to whether a grand compromise can be reached.

On December 1, Kim Byung-ki, Floor Leader of the Democratic Party of Korea, and Song Un-seok, Floor Leader of the People Power Party, continued negotiations over next year's budget bill. Despite ongoing efforts over the weekend to find common ground, significant differences on numerous projects led both sides to postpone their scheduled meeting on November 30 and instead continue negotiations through the secretaries of the Special Committee on Budget and Accounts.

The Democratic Party hopes to process the budget bill within the legal deadline through bipartisan agreement, considering that this is the first budget of the new administration and in response to President Lee Jaemyung's request. Democratic Party leader Jeong Cheongrae expressed willingness to negotiate at the party's Supreme Council meeting, stating, "As President Lee said, if the opposition's demands are reasonable and not merely about indiscriminate cuts, we are ready to cooperate in a bipartisan manner." Kim Byung-ki also stated, "We will operate the subcommittee until the last moment to resolve all outstanding issues."

Kim Byung-ki, Floor Leader of the Democratic Party of Korea (right), and Song Eon-seok, Floor Leader of the People Power Party, greet each other on the 1st at the National Assembly in Yeouido, Seoul, ahead of an additional negotiation meeting regarding contentious budgets and proposals to raise corporate and education taxes. Photo by Yonhap News Agency

While the ruling and opposition parties have agreed to narrow down key issues through their respective secretaries, the primary question is whether the floor leaders can produce meaningful results through direct talks. The opposition has reportedly raised concerns over the 1.15 trillion won regional gift certificate budget, the 4.2 trillion won reserve fund, and the 8.2 billion won special activity fund for the presidential office. Regarding the regional gift certificate budget, the People Power Party argues that it is populist spending aimed at the local elections. For the reserve and special activity funds, they criticize the Democratic Party for being hypocritical, citing large-scale cuts made during the previous Yoon Suk Yeol administration.

Han Byungdo, a Democratic Party member and chair of the National Assembly's Special Committee on Budget and Accounts, expressed regret at a press conference that the committee was unable to complete its review of the budget bill within the statutory deadline. Han stated, "The People Power Party continues to insist on cuts to a wide range of budgets, including funding for artificial intelligence (AI) for future growth, the mother fund for venture companies, the regional gift certificate program, child allowance for overcoming low birth rates and promoting balanced development, basic income for rural and fishing communities, and the national university development project, which is essential for long-term national planning."

If the ruling and opposition parties fail to reach an agreement, the budget bill will likely be delayed until December 9, when the regular session of the National Assembly ends. According to the National Assembly Act, the government's original proposal has already been automatically submitted to the plenary session.

Negotiations on tax laws related to next year's revenue have been concluded between the parties. If bipartisan agreement is not reached, the tax laws could be determined according to the automatic referral provisions of the National Assembly Act. With the ruling party holding a majority, the tax laws may be finalized in a form that reflects their position, prompting the People Power Party to seek compromise. The previous day, the National Assembly's Strategy and Finance Committee held consecutive meetings of the Tax Subcommittee and the full committee, passing related budget bills. Amendments to the Restriction of Special Taxation Act, including the creation of a new bracket for dividend income exceeding 5 billion won and applying a maximum tax rate of 30%, were also approved.

On the contentious issues of corporate tax and education tax, the ruling and opposition parties failed to reach an agreement, so the government's proposals will be submitted to the plenary session. The corporate tax rate will be increased by 1 percentage point across all tax brackets. The government's proposal to raise the education tax rate for financial and insurance companies with annual revenues exceeding 1 trillion won from the current 0.5% to 1% will also go directly to the plenary session.

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