South Korea’s National Assembly on Saturday passed the 2017 budget at 400.5 trillion won ($341.4 billion) with an increase in spending on infrastructure and a cut in welfare expenditure.

The budget is 200 billion won smaller than the government’s plan, but is the first to surpass 400 trillion won.

The Assembly passed the national spending plan in a 221-30 vote with 30 abstentions, after the government and lawmakers resolved their differences on the controversial free child care program.

The total budget is 3.7 percent larger than the 2016 budget plan of 386.4 trillion.



The Ministry of Strategy and Finance originally had planned in late August to cut spending on social infrastructure such as railway and road construction to 21.8 trillion won in 2017 from 23.7 trillion won in 2016.

However, the government agreed with lawmakers to spend up to 22.1 trillion won on social infrastructure, the ministry said in a statement. On-year, it is a 6.6 percent cut.

In detail, the government is to spend 583.3 billion won in building a railway along the western coastline, another 287.6 billion won on a railway between Icheon, Gyeonggi Province, and Mungyeong, North Gyeongsang Province and 221.1 billion won on a railway between Boseong and Imseong-ri Station in South Jeolla Province.

On welfare, the parliament and the government agreed to cut spending by 500 billion won to 129.5 trillion won in 2017 from the previous plan of 130 trillion won.

However, the total spending plan on welfare in 2017 is a 4.9 percent gain from 123.4 trillion won in 2016.

The government said the major focus of the 2017 budget will be supporting jobs and helping stabilize the livelihood of the vulnerable households.

The government will add 50 billion won to support more than 10,000 jobs in the public sector for youths. It will also raise spending on jobs for seniors and their social activities to 466.2 billion won next year from the previous plan of 440 billion won.

The budget approval came as the government compromised to pay up to 860 billion won in a 2 trillion won child care program for children aged between 3 and 5, instead of the previous plan of 700 billion won. The remaining will be covered by provincial governments’ budget.

In return, opposition party members who take the majority seats in parliament gave up their plan to raise corporate tax. Instead, they persuaded the government to set a new top income tax rate for high income earners.

Under the agreement between parliament and the government, those who earn more than 500 million won in taxable income will be subject to a new income tax rate of 40 percent in 2017, instead of the current 38 percent income tax levied on those with more than 150 million won of taxable income.

The new tax code is expected to bring in 600 billion won more in annual tax income for the government.

The Finance Ministry said about 46,000 high income earners will be affected by the new income tax rate.

The final budget, meanwhile, excluded funds that had been set aside for culture and sports related projects, many of which have been linked to the on-going scandal over President Park Geun-hye’s friend Choi Soon-sil, who is accused of colluding to peddle influence.

The Ministry of Culture, Sports and Tourism, for instance, saw a reduction of 78 billion won of operation and promotion spending that had been earmarked for the Cultural Creation and Convergence Belt project. 

By Kim Yoon-mi (yoonmi@heraldcorp.com)