[News in focus] Finance minister refuses to back fiscal commissionThe finance minister has spoken out against a tax reform proposal made by a presidential committee earlier this week, raising concerns of yet more discord among the senior officials in charge of Korea’s economy.
Kim Dong-yeon, the finance minister and deputy prime minister for the economy, told local reporters on Wednesday that he cannot provide “any comment on topics other than the comprehensive real estate tax reform,” adding that some of the proposals made by the Presidential Commission on Fiscal Reform need “further review.” Kim made the comments after a meeting with economy-related ministers at the BMW Driving Center in Yeongjong Island off the coast of Incheon.
The finance minister was referring to a recommendation made by the commission on Tuesday that the government lower the threshold for the aggregate financial income tax - which refers to dividend payment and deposit interest - that qualifies a person to pay financial income tax from 20 million won ($17,887) to 10 million.
Another high-ranking official from the Finance Ministry reportedly said that it’s difficult to drastically and suddenly change taxation standards.
The remarks from officials at the Finance Ministry raise suspicions that the Moon Jae-in administration is divided on economic issues.
An official from the Finance Ministry explained that the proposal was made by the commission without a public hearing and that, while the ministry is not opposing the idea, it would be difficult for the recommendation to go into effect next year.
This isn’t the first time that government ministers have failed to see eye-to-eye on the economy. Kim and other officials, including Jang Ha-sung, President Moon’s chief of staff for policy, also appeared to disagree on the effect of the minimum wage hike.
Kim’s stance was that it is possible that the hike could have a negative influence, while Jang and others were adamant that this was not the case.
Following the statements from the Finance Ministry, the Blue House tried to quell concerns of discord.
“There is no difference in opinion between the Blue House and the finance minister,” said Blue House spokesperson Kim Eui-kyeom during a briefing, adding that the right of taxation lies on the government, not on the commission.
Some market watchers welcomed Kim’s comments.
“It’s necessary at this point for high-ranking officials such as Kim to slow down the pace of reform pushed by the Blue House,” said Yun Chang-hyun, an economic and business professor at the University of Seoul. “Many of the policies are very anti-business and labor-friendly.”
“But [the government] must keep in mind that it is businesses that create jobs and make investments,” Yun explained. “Pushing them to the corner will undermine their ability to do so and for this reason, while it may look like discord, a certain level of checks and balances is a good sign.”
Nevertheless, the proposal by the commission surprised taxpayers and caused confusion in the market.
The Korea Taxpayers Association, a local civic group, announced on Thursday that it opposes the recommendation by the commission, saying that “such a decision would engender side effects such as financial assets being rechanneled to the real estate market or moved overseas.”
“Any income earner who qualifies for the maximum tax rate of 42 percent due to other income sources such as their wage would see their tax burden increase by 28 percent, which means they are likely to change their asset portfolios,” explained Kim Seon-taek, president of the association.
“It’s inevitable that money will move around,” Yun predicted. “People will reduce the deposits they have in banks to decrease the interest.”
Lowering the threshold would increase the number of Koreans subject to the tax from 90,000 to 400,000.
BY CHOI HYUNG-JO [firstname.lastname@example.org]
More in Finance
Gov't to monitor market volatility as bond yield spread widens
Seoul stocks up 2 percent on expectations of improved earnings
Short-selling news just a big misunderstanding, FSC says
Retail investors go big on big caps, making risky bets
Kospi drops 2.33% as foreign, institutional investors look for profit