Despite strong semiconductor exports, slow recovery in youth employment and vulnerable groups is expected to make growth disparities and government responses key issues during this year's National Assembly hearings by the Finance and Economy Committee. The differences in tax burdens resulting from real estate tax reforms and the effectiveness of tax collection will also be scrutinized.
The National Assembly's Finance and Economy Committee will conduct hearings on the Ministry of Economy and Finance on October 6 and the Ministry of Planning and Budget on October 8. Questions are anticipated regarding policies to spread the warmth of economic recovery and tax equity for the Ministry of Economy and Finance, and financial distribution and project performance for the Ministry of Planning and Budget.
The government acknowledges the gap between growth indicators and the cost of living. On September 28, Deputy Prime Minister and Minister of Economy and Finance Lee Hyung-il stated during a meeting with Bank of Korea Governor Lee Hyun-sung that despite solid growth, pressures from inflation and employment continue, and the recovery pace in vulnerable sectors is slow.
Imbalances are also evident in employment data. In August, the number of employed individuals increased by 184,000 compared to the same month last year, but the youth employment rate fell by 1.0 percentage point to 44.1%. While employment in the health and social welfare services sector rose by 186,000, jobs in the accommodation and food services and manufacturing sectors decreased by 61,000 and 38,000, respectively. The extent to which improvements in key export sectors translate into domestic demand and employment will be a focus of examination.
The effectiveness and sustainability of livelihood support measures are also under scrutiny. In the second quarter of this year, the average monthly income of the bottom 20% of households increased by 7.5%, surpassing the 3.8% growth rate of the top 20%. Although distribution indicators improved due to support payments for high oil prices, the disposable income of the bottom 20% was 1,094,000 won, falling short of their consumption expenditure of 1,372,000 won. The key question is whether income and consumption improvements can continue after support ends.
During the hearings for the Ministry of Planning and Budget, there will likely be inquiries into whether support programs for youth, regional, and vulnerable groups have led to sustained employment and income improvements. It is expected that the evaluation of integrated fiscal project performance introduced this year will be reflected in budget adjustments, and whether the consolidation of similar and overlapping projects has not reduced necessary support will also be a point of concern. The organic connection between the Ministry of Economy and Finance's economic policies and the Ministry of Planning and Budget's financial distribution following their organizational separation will also be examined.
Real estate tax issues center on the fairness and predictability of taxation based on actual residence. The government’s tax reform proposal this year includes shifting the criteria for comprehensive real estate tax and capital gains tax from ownership to residency. A key issue will be how much the circumstances of taxpayers unable to reside in their homes due to employment or treatment will be recognized.
Questions are expected regarding whether the temporary easing of capital gains tax for multiple homeowners has maintained policy consistency and whether unreasonable tax burdens among taxpayers arise depending on the timing of transactions. The differences in taxation based on rental methods, such as monthly rent and jeonse, and the potential for landlords to pass tax burdens onto tenants will also be points of examination.
During the National Tax Service hearings, the performance of the tax collection management team operating from 133 tax offices nationwide will come under scrutiny. According to the National Tax Service, the 500-member team, which was piloted from March to early June, collected 15.12 billion won against a budget of 5.3 billion won. It will be crucial to determine whether they maintained performance relative to costs after expanding operations and whether there are additional results distinct from existing collection activities.
Key points of assessment will include whether intentional defaulters and those in financial distress were properly distinguished. The effectiveness of collections from defaulters hiding assets and whether support for recovery, such as welfare connections, was provided to those facing financial difficulties will serve as criteria for evaluating the equity of tax and collection administration.
* This article has been translated by AI.
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