2023 budget finally passed after corporate tax compromise
The budget for 2023 has finally been passed, more than 20 days after its legal deadline and on Christmas Eve.
The legislators of the two largest parties – People Power Party (PPP) and the Democratic Party (DP) – on Saturday approved on a 638.7 trillion won ($490 billion) budget, which is 300 billion won less than the one proposed by the government.
As agreed on Thursday between the two parties, 4.6 trillion won worth of budget including havling the spending for President Yoon Suk-yeol’s newly created departments within the MInistry of Interior and Safety and the Ministry of Justice was cut. But 3.9 trillion won budgets were added.
This included 1.7 trillion won of additional budget that will be used in supporting the vulnerable people such as elderlies, people wit disabilties as well as small business owners facing difficulites from rising inflation and high interest rates.
Some 700 billion won were added in safety related issues especially related to the Itaewon tragedy where 158 people died on Oct. 29 due to massive crowd that turned up in celebrating Halloween.
Also 1.5 trillion won of budget were added on revitalizing the local economy includnig financing areas that could be damaged by typhoons.
Among the 273 lawmaker that voted, 251 approved.
Several key tax reforms have been approved. Most important was the 1-percentage-point corporate tax cut. The PPP and the government had demanded the maximum tax rate be lowered to 22 percent from 25 percent.
The tax cut compromise was reached on Thursday making the vote possible.
Lower real estate taxes were also approved changing the assessed value threshold for the comprehensive real estate holding tax, changing some of the parameters for applying the tax and changing the tax rate.
A new capital gains tax that was supposed to go into effect next year will be delayed for two years. When enacted, gains on stocks, bonds and derivatives of over 50 million won will be taxed, while a trading tax will be lowered from 0.23 percent this year to 0.15 percent by 2025.
These were the key reforms that both parties agreed on Thursday after more than 20 days of bickering.
The president’s office expressed disappointment about the budget.
“The budget for the people’s livelihoods has been dulled,” deputy presidential spokesperson Lee Jae-myoung said on Friday. “More could have been done, but we had no other choice but to reach an agreement in regards to the Yoon Suk-yeol government’s budget.”
The deputy spokesman said the goal of the budget is to spend to create jobs and revitalize the economy.
The two major parties battled over budget for a police bureau that was newly created by the Yoon government at the Ministry of Interior and Safety and a public office candidate screening department under the Ministry of Justice. They were also at loggerheads over DP chief Lee Jae-myung’s push for the funding of local gift coupons.
In the compromise, the budget for the departments was cut in half, and 352.5 billion won will be allocated to the gift coupons.
BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]