Thwarting a supplementary budget

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Thwarting a supplementary budget

The National Assembly has already missed the July 20 deadline to endorse a supplementary budget to boost domestic demand after the outbreak of Middle East respiratory syndrome. The rival parties agreed to hold a budget committee meeting on Thursday, but are unlikely to reach an agreement within the month, given current differences.

A supplementary budget has never been so desperately needed. Business at both traditional markets and department stores has been devastated by the unprecedented outbreak. The legislature promised to approve the budget proposal as soon as possible, but the parities are clashing over the budget due to an untimely disagreement over gift certificates for the poor and the hike in corporate taxes. The main opposition is demanding the government apologize for the shortfalls in tax revenues that the country has seen for four years in a row and come up with measures such as a hike in corporate taxes. The opposition’s argument is justified as nearly half of the extra budget - 5.6 trillion won ($4.86 billion) - needs to be spent to make up for the tax revenue shortfall. The government needs to revise budgeting methodology so that tax revenue is based on a realistic growth outlook.

But the opposition is wrong to argue for a hike in corporate tax rates because of a tax revenue shortage. The shortage is due to the government’s overly optimistic economic outlook. Tax revenues haven’t fallen just because of lower corporate taxes under the previous administration. The issue also shouldn’t be addressed and solved through discussions over a few days. The corporate sector warns investment sentiment could be damaged. Others argue the corporate sector must contribute more to the economy through taxes if it doesn’t hire or invest more. Opinions in the government and ruling party also differ. The opposition is wrong to connect the controversial issue with the urgent supplementary budget.

The main opposition’s call for budgeting on gift cards is also untimely. The National Assembly Health and Welfare Committee’s budget subcommittee passed a proposal to raise 214 billion won to supply two million low-income families with coupons to help them buy daily necessities based on the opposition’s argument that the measure will aid traditional markets. The lawmakers argued that Japan used a similar stimulus in 1999. But they must get the facts right. Most of Japan’s subsidized gift certificates were cashed in for savings and did little to increase spending.

The opposition has the right to raise questions. But they cannot justify the delay in passing a supplementary budget that is designed to ease hardships for the middle and working classes.

JoongAng Ilbo, July 22, Page 30

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