The Yoon Suk-yeol administration last week announced an outline of its economic policies for the next five years, but they were stalled immediately due to opposition by the Democratic Party of Korea.
The administration said it will scrap the previous administration’s government-led growth paradigm and encourage the private sector, particularly companies, to take the lead in revitalizing the Korean economy.
It will lower the top rate of corporate income tax and relax business regulations that the previous government tightened, such as criminal punishment of chief executives for industrial accidents and the rigid 52-hour workweek.
The problem is that many of the policies the Yoon administration plans to implement require legislation.
Laws must be revised to cut the top rate of corporate tax and lessen comprehensive real estate holding tax. The same is true of policies to amend the 52-hour workweek, support new promising industries and establish rules for fiscal soundness.
But the main opposition Democratic Party opposes the new government’s economic policies.
If the party disapproves of the government‘s policies, there is no way for the administration to make them a reality, because the party has 170 of 300 National Assembly seats.
The party sharply criticized tax reduction policy, among others. It argued that the policy will benefit only large companies and rich people.
The party raised the top rate of corporate income tax from 22 percent to 25 percent in 2017, the first year of the previous administration under President Moon Jae-in. At that time, the party’s chief policymaker said that it raised the tax because large companies were stingy about investment, employment and wage increases. This remark is an effective admission that the corporate tax hike was punitive.
So was the hike in the comprehensive real estate holding tax. The Moon administration raised the top rate of that tax sharply, too, to the extent that homeowners needed to borrow money to pay it.
It seems that the party is resorting to its chronic habit of divisive politics.
Regarding the corporate tax cut policy, the party’s floor leader said that half of small and mid-sized companies earn so little that they cannot afford to pay corporate tax fully. This was a remark to raise an impression that the policy is unfair to small and mid-sized companies.
When the previous government dropped its comprehensive real estate tax bomb in November last year, the party tried to assure people that it was “a tax on the wealthy in the nation’s top 2 percent.” But it was a misleading argument.
The Korean economy faces a serious economic crisis. Prices of crude oil, food and industrial materials have been surging due to supply chain disruptions impacted by the pandemic, the Ukraine war and the US-China fight for hegemony. Inflation is skyrocketing, interest rates are climbing and the value of the Korean currency is falling. Domestic production, consumption and investment backed away simultaneously.
This dire situation requires ruling and opposition parties to cooperate for the nation to overcome the crisis. However, the National Assembly is effectively closed since the second half of its four-year term began on May 30. Its speaker has not been elected yet and its committees not chaired, either. That way, it is difficult to weather the crisis.
The Democratic Party must not flaunt its legislative power to abort the Yoon government’s efforts to revive the economy.
Punitive taxes imposed by the previous regime eroded the international competitiveness of Korean companies and made people’s lives difficult.
Voters gave the party three straight losses in by-elections, presidential and local elections. It may well reflect on itself over why they turned their backs.
Yoon said on Friday that his administration would “correct” punitive taxation to free up companies and get the market back on track. Well said.
If the Democratic Party does not want to see people blame it for spoiling the Korean economy once more -- this time as an opposition party -- it must not oppose whatever the new government tries to do but at least, it should give the government a chance to try its policies.