Yoon government proposes record 59-trillion-won extra budget

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Yoon government proposes record 59-trillion-won extra budget

President Yoon Suk-yeol holds his first cabinet meeting on Thursday at his office in Yongsan, Seoul, where one of the key issues addressed was the record-breaking supplementary budget. [JOINT PRESS CORPS]

President Yoon Suk-yeol holds his first cabinet meeting on Thursday at his office in Yongsan, Seoul, where one of the key issues addressed was the record-breaking supplementary budget. [JOINT PRESS CORPS]

The Yoon Suk-yeol government is proposing a record 59.4-trillion-won ($47 billion) supplementary budget that will mainly focus on compensating small businesses affected by the pandemic.  
 
The previous record is the 35.1 trillion-won supplementary budget in 2020.  
 
When netting out subsidies to local governments and transfers for local educations, the extra spending totals 36.4 trillion won.  
 
"The new government's economic team is starting off facing complex challenges in which it has to expand support to small businesses without aggravating the economy," said Finance Minister Choo Kyoung-ho. "The supplementary budget is the first step toward meeting our responsibility."
 
Like many countries, Korea needs to provide support without further fueling inflation.  
 
Of the 36.4 trillion won, 26.3 trillion won will go to small businesses, 3.7 million of which will receive between 6 million won and 10 million won each.
 
"We are at a point where fully compensating small businesses for losses is necessary," Choo said.  
 
Another 6.1 trillion won will be used to help vulnerable households, with 1 million being disbursed directly to 2.27 million households facing difficulties, funding being transferred to areas affected by wildfires and coupons being distributed for discounts on agricultural and fishery goods.  
 
Most of the extra spending will be funded with taxes. The Finance Ministry expects to collect 53.3 trillion won more than earlier projected for this year.  
 
Of that surplus, 44.3 trillion won will be used for funding the supplementary budget.
 
Another 8.1 trillion won will be funded through last year's tax surplus and other government funds, while 7 trillion won will be generated by restructuring spending.  
 
According to the Finance Ministry, the government collected 111.1 trillion won in the first three months of the year, 22.6 trillion won more than in the same period last year.
 
Collections are one-third of the forecast for the full-year tax take.
 
The government credits strong exports, a recovery in employment and increased consumer spending. Corporate, income and value-added tax revenue all increased.
 
Transportation tax revenue declined due to a cut in the fuel tax.
 
The remaining 9 trillion won in surplus taxes will be used to pay down debt in hopes of reducing the debt-to-GDP ratio.
 
The ratio rose sharply during the Moon Jae-in government from 36 percent before he started to 47 percent by the end of last year.  
 
In Yoon's extra budget, 23 trillion won will be transferred to local governments and local schools.  
 
When the government has a tax surplus exceeding 40 trillion won, 40 percent of the amount above 40 trillion won has to be sent to local governments and schools. 
 
The government is submitting its supplementary budget proposal to the National Assembly on Friday, but the Democratic Party (DP), which holds the majority of seats, may object to the bill.
 
Yun Ho-jung, co-chief of the DP's emergency leadership, has raised concerns about the tax collection estimates.
 
"Last year, tax surpluses were 52 trillion won," Yun said on Thursday during a radio show. "It's only five months into the year, and they're talking of a 53 trillion won surplus."  
 
Yun also noted that the president has broken his campaign promise of 10 million won compensation per business.  
 
 

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]
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