Lee Jaemyung's Signature Budgets for Local Currency and Basic Income Fully Preserved...Corporate Tax Raised Across All Brackets

Looking at Next Year's 728 Trillion Won Budget
1 Trillion Won Cut from Government Proposal
National Debt to Reach 51.6% of GDP Next Year

Next year's national budget has been finalized at 728 trillion won. Although some investment budgets aimed at realizing the Lee Jaemyung administration's economic paradigm, such as artificial intelligence (AI), were cut, the government maintained its original proposal by increasing major livelihood-related budgets within the scope of the reductions. Most of the signature Lee Jaemyung policies, including the expansion of local currency issuance and the pilot project for basic income in rural and fishing villages, were kept as originally planned. The final negotiations between the ruling and opposition parties, which centered on maintaining the original proposal versus making cuts, accelerated at the last minute as consensus was reached on keeping the total expenditure at the level of the government's initial proposal. This is the first time in five years that the National Assembly has met the legal deadline for passing the budget. As the first budget of the Lee Jaemyung administration, which called for expansionary fiscal policy and raised the budget by over 8% compared to this year, passed the National Assembly, debates over fiscal soundness are expected to continue.

Yonhap News Agency

Net Decrease of 100 Billion Won Due to Increases and Cuts... Key Projects Remain Intact

According to the Ministry of Economy and Finance on December 3, the National Assembly held a plenary session the previous night and finalized next year's budget at 727.8791 trillion won. This is an 8.1% increase compared to this year's main budget, significantly higher than the average annual increase of 3.5% during the three years of the Yoon Sukyeol administration, which advocated for fiscal soundness. While about 4.3 trillion won was cut from the government's original proposal (728.0059 trillion won), a similar amount was added back, resulting in a net decrease of about 100 billion won compared to the original plan. It is the first time in five years that the budget bill has been finalized by the legal deadline through bipartisan agreement.

Although the first budget of the Lee Jaemyung administration passed the National Assembly, concerns over fiscal soundness are expected to persist. This is because, under the current administration's expansionary fiscal stance, the national debt-to-GDP ratio is not expected to decline. Due to increased non-tax revenues such as surplus funds from the Bank of Korea, total revenue increased by 1 trillion won compared to the government's proposal. As a result, the managed fiscal deficit improved from 4% to 3.9% of GDP. National debt (1,301.9 trillion won) surpassed 1,300 trillion won this year due to two supplementary budgets, and with the new budget, next year's national debt will reach 1,413.8 trillion won, accounting for 51.6% of GDP. This is the first time the national debt ratio has exceeded 50%.

Signature Lee Jaemyung policies, such as local love gift certificates, were maintained as originally planned. The 1.15 trillion won in government funding to expand local currency issuance and the 1 trillion won support for the National Growth Fund, which is jointly established by the public and private sectors to foster future industries, were both kept as proposed. The budget for the rural and fishing village basic income pilot project was increased by 63.7 billion won compared to the government proposal, as the number of target regions expanded from seven to twelve. While there was discussion in the National Assembly about increasing the child allowance budget, it was ultimately approved as per the government's original plan (2.4822 trillion won) due to opposition from the ruling party. Accordingly, starting next year, the eligibility for the child allowance will be raised from children under seven to children under eight years old.

Budgets for future investments were also increased. An additional 97.5 billion won was allocated for renewable energy support, such as installing energy storage systems (ESS) in solar income villages, and 61.8 billion won was added for supporting AI mobility demonstration cities. Reflecting the fire incident at the National Resources Management Agency that occurred after the government proposal was submitted, an additional 400 billion won was allocated. Furthermore, 1.1 trillion won was added for the capital investment in the Korea-US Strategic Investment Corporation, which will be newly established next year.

Livelihood-related budgets will also be significantly expanded next year. Support for vulnerable groups and the livelihood economy, such as expanding the national funding for community-integrated care to all local governments (13.7 billion won), was increased by 400 billion won. This includes strengthening care for people with severe disabilities (9.4 billion won), lowering interest rates for the Sunshine Loan special guarantee (29.7 billion won), increasing support for public transportation flat-rate passes (30.5 billion won), and expanding city gas supply (140 billion won).

Yonhap News Agency

Dividend Income Over 20 Million Won Per Year to Be Separately Taxed at Up to 30%

On this day, the amendment to the Restriction of Special Taxation Act, which includes the separate taxation of dividend income, was also passed. Depending on the amount of dividend income, a separate tax rate of 14% will apply up to 20 million won, 20% for amounts exceeding 20 million won up to 300 million won, and 25% for amounts exceeding 300 million won up to 5 billion won. A new bracket was created for amounts exceeding 5 billion won, which will be taxed at a maximum rate of 30%, thereby reducing the tax burden. Previously, the Ministry of Economy and Finance had proposed a maximum rate of 35%, but it was later agreed at a high-level ruling-opposition-government meeting to lower the maximum rate to 25%. However, due to ongoing concerns about tax fairness for ultra-high dividend income, it was ultimately decided to create a new bracket for amounts exceeding 5 billion won.

The separate taxation of dividend income will apply to companies whose dividend payout ratio-defined as the ratio of dividends to net income for the period-is 40% or higher, or when the dividend payout ratio exceeds 25% and has increased by more than 10 percentage points compared to the previous year. The separate taxation of dividend income will apply to dividends paid from next year onward.

For other related bills, such as the highly contentious corporate tax and education tax increases, no agreement was reached, and the government's original proposals were passed. Previously, the government had announced a tax law amendment to uniformly increase the corporate tax rate by 1 percentage point for each tax bracket after consultation with the ruling party. This restores the corporate tax rate, which had been uniformly reduced by 1 percentage point under the Yoon Sukyeol administration, to its previous level.

On December 9, the government plans to submit and approve at the Cabinet meeting the "Consent to National Assembly Increases in the 2026 Budget Bill and Budget Announcement Plan" and the "2026 Budget Allocation Plan." The Ministry of Economy and Finance announced that, to respond to future growth and stabilize livelihoods, 75% of expenditure budgets will be allocated in the first half of the year to facilitate early investment.

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