Budget passed, corporate tax rates unchanged

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Budget passed, corporate tax rates unchanged

The National Assembly passed a 400.5 trillion won ($341 billion) national budget on Saturday, the largest ever.

It is 3.7 percent or 14.1 trillion won more than last year’s budget, but 200 billion won less than what the government had initially proposed.

A significant amount of spending will be used for resolving youth unemployment and stabilizing people’s livelihoods. A total of 129.5 trillion won will be dedicated to the health, welfare and employment sectors.

The parliament agreed to expand public sector jobs to more than 10,000 in 2017 by injecting 50 billion won.

Subsidized day care, a controversial issue, will be funded with 860 billion won or only 45 percent of the 2 trillion won required for the program.

The remaining 55 percent of the cost will have to be covered by regional governments.

The day care program is provided to kids between the ages of three and five.

A corporate tax hike strongly suggested by the opposition parties was not included.

Despite the unchanged corporate tax rate, however, some tax deductions applied to conglomerates, small- and mid-sized firms have been reduced.

Before, companies could get tax deductions when making investments in emerging businesses at a rate of 7 percent for conglomerates, 8 percent for mid-sized firms and 10 percent for small-sized firms. The top two rates were shaved to 5 and 7 percent.

A new top tier has been created in the income tax segment for individuals who earn more than 500 million won annually.

The number of people who fall in this category is estimated at 46,000. They will face a 40 percent income tax rate from next year. Previously, a 38 percent tax rate was applied to anyone who earned more than 150 million won a year. The new tax bracket is expected to generate 600 billion won in additional tax revenues.

This is the first time in 16 years that an income tax rate reached as high as 40 percent.

The government will also spend 500 billion won more in a subsidy program for farmers. A total of 1.5 trillion won will be used to compensate for loss suffered by farmers due to a fall in rice prices.

The budget for social overhead capital (SOC), which was originally planned to be reduced 8.2 percent, has actually been increased. The parliament agreed to inject 400 billion won more into construction of railways and subways. A total of 22.1 trillion won will be spent in the sector next year.

Meanwhile, the so-called “Choi Soon-sil budget” of 174.8 billion won which was planned to be invested in diverse cultural projects under the controversial presidential friend’s direction, was deducted from the Ministry of Culture, Sports and Tourism.

The project dubbed “Cultural Creation and Convergence Belt” initiated by Choi’s currently imprisoned confidant Cha Eun-taek lost 77.9 billion won from its budget.

A project to establish a fund for the sports industry allegedly infuenced by Kim Chong, the former second vice minister of the culture ministry and also a confidant of Choi, lost its funding too.

“Projects that have presumptive evidence of being related to Choi Soon-sil and others who have unrighteously intervened were completely banned or stricken from the budget,” explained Rep. Kim Hyun-mi, head of a special committee on budget & accounts.

BY JIN EUN-SOO [jin.eunsoo@joongang.co.kr]
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