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Moon’s policies get green light

Parties agree to budget, moving one step closer to income-led growth
Dec 05,2017

As the three major political parties finally reached an agreement on next year’s 429 trillion won ($394.7 billion) budget two days after the Dec. 2 deadline, the Moon Jae-in government has finally secured the first step toward swiftly implementing its economic growth package.

In fact President Moon himself pressed the National Assembly on Monday to act quickly to confirm next year’s budget so that the economy’s current momentum doesn’t stall.

“Our economy recently has been improving and the government is putting all its efforts into trying to keep our economic situation continuing,” Moon said. “Next year’s budget should be aligned with this effort.”

He asked the political parties to set aside their differences in focusing on keeping the recent economic momentum alive.

Moon stressed the importance of the importance of the swift execution of the budget for economic growth.

“In the last supplementary budget, there was a strong protest from the opposition parties, but it played a huge role as it helped the third quarter growth increase sharply,” Moon said.

One of the key issues that the parties comprised on was the hiring of public servants next year.

The Moon administration and the ruling party have stepped back from their earlier demands of hiring more than 10,000 central government employees next year. The opposition parties wanted a smaller number, with the People’s Party proposing 9,000 and the conservative Liberty Korea Party demanding the number be cut back to 7,000.

Increasing the number of jobs has been a key element of the administration’s economic policy. Since the campaign, Moon has stressed his belief that increased hiring in the public sector will encourage the private sector to do the same. This will lead to increased personal income and spur consumption that will create sustainable growth.

The parties have also reached an agreement on the funding of small businesses including self-employed entrepreneurs that will be burdened by rising minimum wages.

The size of the fund - 3 trillion won - remains unchanged from the initial proposal made by the government. However, the ruling party has agreed to the opposition parties’ demand of adding a condition that limits the program budget for 2019 to the same amount.

The program comes at a time when small businesses with less than 30 employees are likely to be hit hard by the 16.4 percent hike in the minimum wage next year.

The opposition parties have demanded that the program has a lifespan of a year, especially as it would be a waste of taxpayer’s money especially since the government has promised to raise the minimum wage to 10,000 won per hour by the end of its tenure and therefore would result in the budget for the program needing to be increased exponentially.

The ruling party stressed that no deadline should be attached to the program so that it can be flexible accordingly to the economic situation.

One of the noticeable agreements that the parties made on Monday was a change in corporate tax, which had recently been criticized.

While the administration is pushing for tax reform that will apply higher taxes to major conglomerates and high earners, advanced economies including the U.S. and Japan have been working to lower their corporate tax in the hope of raising their own industry’s competitiveness.

The parties also agreed to raise the bar on companies that would be faced with the highest corporate tax rate. The initial proposal was to apply the maximum 25 percent tax rate to companies whose taxable profit exceeds 200 billion won, while the agreed version now has raised that bar to 300 billion won.

As a result of the change, only about 77 companies are expected to be subject to the maximum rate.

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