Budget for 2018 will focus on jobs, wealth gap

The government said it will focus on jobs and reducing the gap between rich and poor through new tax regulations that will go into effect next year.

According to the Ministry of Strategy and Finance Tuesday, the government has set four major goals for this year, which are creating more jobs, preparing for the so-called fourth industrial revolution, raising Korea’s low birth rate and reducing wealth polarization. Budget guidelines were approved by the Cabinet on Tuesday.

“We have introduced the polarization issue for the first time as a major agenda for allocating budget because we believe this issue is becoming very serious in the country,” said Park Chun-sup, head of the budget department of the Ministry of Strategy and Finance.

One significant change to next year’s tax regulations is an expansion of tax benefits for companies that hire young people. Youth unemployment continues to be high in Korea.

Local companies hiring young people will receive up to 10 million won ($8,999) in tax cuts per every hire, up from the current 5 million won. The youth population is defined as people aged 15 to 29. Men who served in the military for five years can be categorized as youth until the age of 34.

The Finance Ministry said small and mid-size companies that upgrade contract workers to full time staff will receive up to 7 million won in tax cuts next year, which is higher than the 2 million won given this year.

Companies that create more jobs in general will receive further tax cuts as well. Currently, small and mid-size companies received from 4 percent to 6 percent tax deductions for investments that create jobs. They will be increased to 6 percent to 8 percent.

For mid to large size companies, the deductions will rise 1 percentage point from between 4 percent and 6 percent to between 5 percent and 7 percent. The government will not make changes to deductions for large companies from the current 3 percent to 5 percent.

“Since the local labor market continues to be sluggish, the government came up with ways to give more incentives to companies to create more jobs, while giving more financial benefits to low income households,” said Park Hong-ki, a director at the Finance Ministry.

The government will expand the beneficiaries of the earned income tax credit, which is a refundable tax credit for low to mid-income working individuals.

Currently, the benefit was available for people over 40 but the government will lower the age to 30 starting next year.

According to the Finance Ministry, its plan to give up to 1 million won tax cuts to newlyweds wasn’t approved by the Cabinet Thursday as many ministers weren’t sure it would help raise the marriage and fertility rates.

However, the budget isn’t finalized for next year as a presidential election will be held on May. 10. Specific budget requests by government branches are usually submitted in late May.

BY KIM YOUNG-NAM [kim.youngnam@joongang.co.kr]