'Inclusive state' without financing plan is a house of cards
A presidential committee to reform public finance wrapped up its 10-month-long activities Tuesday, releasing a 16-page report in the form of policy recommendations.
Disappointingly, the report's content is vague, abstract and gutless. A case in point is its comment on nonprofit foundations set up by chaebol, often used as a means of hereditary wealth transfers. The report just called for "rationalizing their operation to prevent tax avoidance while expanding external audits."
There were no clear guidelines on the appropriate level of taxation on the irregular inheritance of wealth at family-controlled conglomerates. Nor did it present any distinct direction as to reforming environment and energy taxes to reduce fine dust and other pollutants.
It is hard to believe the panel's initial slogan was "establishing a road map for fiscal reform that can last a century."
The special committee's poor performance is due in considerable part to the government. Bureaucrats turned a deaf ear to the panel's policy recommendations, sharply restricting its role to a nonbinding advisory body. For instance, the Ministry of Economy and Finance smothered the panel's proposal to expand the targets of global taxation on financial income last year.
According to the government's second basic social security plan, Korea will need 332 trillion won ($296 billion) over the next five years to build a social safety net to become an "inclusive state." The government can only raise such an enormous amount of money through reforming public finance ― taxation and the budget. All political slogans unaccompanied by methods to raise financial resources are bound to end up like a house of cards.
The government may be able to hang on with surplus revenue for a few years, however, this is hardly sustainable. Critics are already saying tax reform under the incumbent government is off the table.
Public finance reform is a task that no administrations can avoid, given the trends of the times, such as population aging, the low birthrate and jobless growth. The Moon Jae-in administration ought to rekindle fiscal reform with the cooperation of the National Assembly.
A presidential committee to reform public finance wrapped up its 10-month-long activities Tuesday, releasing a 16-page report in the form of policy recommendations.
Disappointingly, the report's content is vague, abstract and gutless. A case in point is its comment on nonprofit foundations set up by chaebol, often used as a means of hereditary wealth transfers. The report just called for "rationalizing their operation to prevent tax avoidance while expanding external audits."
There were no clear guidelines on the appropriate level of taxation on the irregular inheritance of wealth at family-controlled conglomerates. Nor did it present any distinct direction as to reforming environment and energy taxes to reduce fine dust and other pollutants.
It is hard to believe the panel's initial slogan was "establishing a road map for fiscal reform that can last a century."
The special committee's poor performance is due in considerable part to the government. Bureaucrats turned a deaf ear to the panel's policy recommendations, sharply restricting its role to a nonbinding advisory body. For instance, the Ministry of Economy and Finance smothered the panel's proposal to expand the targets of global taxation on financial income last year.
According to the government's second basic social security plan, Korea will need 332 trillion won ($296 billion) over the next five years to build a social safety net to become an "inclusive state." The government can only raise such an enormous amount of money through reforming public finance ― taxation and the budget. All political slogans unaccompanied by methods to raise financial resources are bound to end up like a house of cards.
The government may be able to hang on with surplus revenue for a few years, however, this is hardly sustainable. Critics are already saying tax reform under the incumbent government is off the table.
Public finance reform is a task that no administrations can avoid, given the trends of the times, such as population aging, the low birthrate and jobless growth. The Moon Jae-in administration ought to rekindle fiscal reform with the cooperation of the National Assembly.
