[REPORTER’S DIARY]Muddle of taxing tax babbleDeputy Prime Minister Kim Jin-pyo said on Feb. 28, “If we collect more revenue by expanding tax sources, we will lower tax rates.” Even though it is hard to achieve larger tax resources with lower tax rates, the goal is desirable in terms of principle.
Mr. Kim on Tuesday allowed a little more detail: “Instead of reducing tax breaks and exemptions, the government will cut corporate taxes to match levels in competing economies in Southeast Asia.” Though he added a proviso that the tax cut would be gradual and long-term, he seemed to hope to lure more investment by revealing several points.
Civic groups, however, resist the plan. The People’s Solidarity for Participatory Democracy urged the government to repeal the proposal, saying in a statement on Wednesday: “The planned corporate tax cut will lighten the tax burden only for large companies and will deplete the national coffers.”
The Korea Federation of Trade Unions also issued a criticism. And some media attacked the administration of President Roh Moo-hyun, saying “The government is pushing for a corporate tax cut contrary to the president’s pledge.”
As the plan has suffered setbacks, President Roh Moo-hyun, acting beyond expectations, stood up to clear the tangle. Mr. Roh said on Wednesday, “Any corporate tax cut will be preceded by consideration of the effect on government finances and the economy.” He stressed, “We should not exacerbate tax inequity.” He also said, “The true intention of the finance ministry seems to be distorted.”
Watching the developments, officials of the finance ministry looked embarrassed. A ministry official said, “The deputy prime minister should elucidate it if there was a misunderstanding. Once the president begins to meddle in this way, cabinet members will cower and be unable to carry out their policies in the right direction.”
“In the end, people won’t trust administrative branches and will go to the president. We will be far from the cabinet-centered administration President Roh emphasized during his presidential campaign.”
Senior officials in the Gwacheon Government Complex are apparently refraining from making comments. Some economic officials point out that the economy, which should be dealt with carefully, is deteriorating, a sign President Roh went a little bit too far.
by Koh Hyun-kohn
The writer is a reporter at the economic affairs desk of the JoongAng Ilbo.