Don’t read their lips: GNP backs off from tax cutsIn an effort to redefine its image as reform-minded, centrist conservatives, the ruling Grand National Party said yesterday that it will consider withdrawing its support for a tax cut for the high-income bracket.
“At the meeting of the party’s Supreme Council this morning, Representative Chung Doo-un proposed that the party should retract its support for the policy designed to lower the income and corporate tax rates for the highest brackets,” said Grand National Party spokeswoman Bae Eun-hee. “We decided to review the possibility seriously.”
The move is in line with GNP Chairman Ahn Sang-soo’s declaration on Tuesday that the ruling party will transform itself to better engage the nation’s middle class. Facing criticism for representing the interests of the rich and other elite groups, the GNP and the Lee Myung-bak administration have promoted working-class-friendly policies and a “fair society” campaign in recent months.
The controversial plans to trim income and corporate tax rates were sponsored by the Lee administration and the ruling party last December to encourage investments and boost the economy. The opposition Democratic Party fiercely opposed the policy, arguing that only the rich would benefit.
While the government wanted immediate tax cuts, ruling and opposition lawmakers reached a compromise that the income tax rate for the highest bracket would be cut from 35 percent to 33 percent but not until 2013.
The two-year delay was also applied to a planned corporate tax cut. The 22-percent rate for companies with more than 200 million won ($176,843) in taxable profits will be cut to 20 percent starting in 2013.
Tax rates for middle- and low-income classes and small companies, however, were trimmed starting this year.
Representative Chung, a member of the GNP’s Supreme Council, recently stepped up moves to kill the tax cuts for the rich and large corporations.
“For the Grand National Party to establish its image as a centrist conservative party, it is crucial to scrap the tax cut plans,” Chung said in an Internet posting on his home page Tuesday. “Before the upcoming legislative and presidential elections, the opposition parties’ key strategy will be an effort to replace an administration that represents the rich. The tax cuts won’t even take place during this administration, and there is no need for us to be misunderstood.”
He also said the tax cuts are a typical example of “populist” policy measures - which the conservatives often accuse the liberals of promoting - adding that canceling the cuts will improve the government’s fiscal health. According to Chung, annual tax revenues are expected to go up by 1.4 trillion won in 2012, 2.3 trillion won in 2013 and 3.7 trillion won in 2014 if the tax cuts for the highest bracket are scrapped.
A GNP source said Chung had also persuaded Minister of Strategy and Finance Yoon Jeung-hyun of the need to retract the policy on Tuesday evening.
The Democrats welcomed the move.
“Although it is belated, we urge the GNP to put its words into action,” DP’s spokeswoman Jeon Hyun-heui said yesterday. “The Lee administration and the GNP have consistently argued for cutting taxes for conglomerates and rich people, disappointing the majority. It has been a consistent demand of the DP that the tax cut plan must be retracted.”
By Ser Myo-ja [email@example.com]