Lawmakers must endorse the economic package

Improving people’s lives and achieving structural reform for sustained growth will be the primary focus of this year’s economic policy. The economic policy outline for 2024 under new Deputy Prime Minister for Economic Affairs Choi Sang-mok in the Yoon Suk Yeol administration contains four key phrases — people’s livelihoods, risk management, dynamic economy, and future generation.

To stimulate domestic demand, the government will carry out various tax cuts. In respect to corporate pleas, the provisional tax breaks for facility investment — including a tax cut on 10 percent of their increased facility investment — will be extended for another year. The temporary tax relief revived last year for the first time in 12 years helped save 2.3 trillion won ($1.75 billion) in tax for the corporate sector.

Tax exemptions for R&D investment will also be granted for the first time until the year’s end. In the meantime, the income tax deduction rate will be doubled from 40 percent to 80 percent when taxpayers use credit cards to shop at traditional marketplaces.

The government is more creative in addressing demographic issues in rural areas. If a single homeowner buys a second home in districts with shrinking populations, the buyer will be exempted from the tax for owning two homes. The move is to motivate retirees to move out of the capital region.

To achieve a dynamic economy, the government is out to remove a lot of red tape. It will lift development restrictions in greenbelt, farming and mountainous locations. The rigid rule of separating farming land from non-farming land enforced since the nation’s founding has been under criticism for constraining the use of land and property rights of elderly farmers. The lifting may pave the way for rationalizing outdated regulations on farming land.

The government has a duty to look after the people. But exempting 200,000 won in electricity bills for 1.26 million small merchants amid the delayed rationalization of utility charges smells of a populist motive. The government must be careful with the balancing act so as not to tilt toward populism.

In his inauguration speech, the deputy prime minister, who also serves as finance minister, called for reinventing the finance ministry. He criticized the absence of the ministry’s of long-term planning function during his confirmation hearing.

But he must closely look at the policy outline to check if the measures truly live up to the goal of achieving economic sustainability for the future generation. Most of the policy measures require legislative approval. The Basic Act on Service Industry Advancement is deadlocked in the legislature for the 12th year. The government must demonstrate its ability to execute good policies.