A red card to the governmentThe Moon Jae-in administration’s 2019 tax shortage is estimated to be 1.3 trillion won ($1.1 billion) as its revenue stopped at 293.5 trillion won, short of its targeted 294.8 trillion won. Hong Nam-ki, deputy prime minister for the economy, predicted that tax balance could worsen if the new coronavirus spreads and prolongs. The new deadly epidemic could wreck the still-weak manufacturing industry and spending activities. A tax shortage could complicate the government’s effort to save the economy.
The government saw excess tax revenue by 20 trillion won annually from 2016 to 2018. But the binge was cut short last year as a result of the government’s spending spree. The government handed out hefty cash allowances for child, youth and senior benefits. It refused to pay heed to voices calling for discretion. Cash handouts last year hit 48 trillion won. The government doled out over 7 trillion won to subsidize employers following steep increases in the minimum wage. Over 10 million people received checks from the government.
But the government remains carefree. It plans to issue a new debt of 60 trillion won to finance another supersized budget of 521 trillion won, which includes 180 trillion won earmarked for welfare benefits. The spending plan was based on the estimate of 2.4 percent growth. But many think this year’s growth may not reach 2.0 percent if the coronavirus outbreak worsens. Oxford Economics, a British think tank, lowered its growth forecast for Korea to 2.0 percent from previous 2.2 percent. Korea Investment & Securities also has cut down its estimate from 1.7 percent to 1.6 percent.
The government has few options in hand against economic emergencies. Some talk of a supplementary budget, but it is far-fetched. For the moment, there is no other way than issuing national bonds. The only solution is to stimulate the private sector. But the government has been going in the opposite direction of other advanced countries by raising corporate taxes and tightening regulations.
The government must dramatically change its course. Umbrella trade unions are even protesting the government’s endorsement of overtime for mask producers due to a steep surge in demand from the spread of the new deadly virus. The labor groups have all turned monstrous as a result of the pro-labor government’s policies unfavorable towards the market and companies. The tax shortage is the market’s red card against government policies.
JoongAng Ilbo, Jan. 5, Page 30