Parliament approves budget bill before legal deadline

The National Assembly was scrambling in a rush throughout the day on Tuesday, the legal deadline for approval of next year’s state budget. If the ruling and opposition parties fail to pass by midnight on the day a revised budget bill that they agreed upon, the original bill submitted by the government could be passed, and hence the parties conducted fierce under-the-table negotiations.

At first, the plenary session of the assembly was to take place around 2 p.m., but the session convened only after 5 p.m. because a meeting between the floor leaders of the ruling and main opposition parties continued through the afternoon. As more than 30 lawmakers of the ruling and opposition parties delivered en masse views on auxiliary bills related to revenue budget, including opposition to a tobacco price hike, even after the opening of the plenary session, the process towards the approval of the budget bill continued to be rough.

○ Struggle due to last-minute contentious issues over auxiliary bills of budget

The ruling and opposition parties continued struggle over deliberation of auxiliary bills for the budget on Tuesday, the deadline for approval of the 2015 state budget. Floor leaders Lee Wan-koo of the Saenuri Party and Woo Yoon-geun of the New Politics Alliance for Democracy held ‘2+2 talks’ of floor leaders and policy committee chairs of the two parties at the NPAD floor leader’s office at around 11:15 a.m. on the day, and sought to make compromise to approve the budget bill. The rival parties stubbornly displayed differences over the package of three taxation measures to boost household income (taxation system for return of corporate income to society, taxation system to raise dividend income, and taxation system to increase labor income), and a ‘revision bill of the inheritance tax and the transfer tax’ centered on the expansion of tax deduction for inheritance of family businesses, measures that were pushed for by Deputy Prime Minister for Economy Choi Kyung-hwan.

Unlike the ruling party that insists on passage of the original bill from the government, the main opposition party demanded withdrawal of a measure to cut the rate of withholding tax for dividend income from 14 percent to 9 percent among the ‘package of three taxation measures to boost household income,” calling it a ‘tax cut for chaebol owners.” The party also expressed opposition to the measure to ease the requirement for tax deduction for family business inheritance designed for ‘small and medium-sized firms and mid-size established enterprises valued at 300 billion won (270 million US dollars) or less and that continued operation for 10 plus years’ to ‘those with 500 billion won (450 million dollars) and that continued operation for five plus years’ by calling it a ‘tax cut for the rich.’ After all, the first round meeting that lasted for over two hours collapsed.

After compiling agendas with secretaries of the parliamentary Strategy and Finance Committee, the floor leaders of the rival parties held a second round meeting at the NPAD floor leader’s office around 2:30 p.m. before managing to open the plenary session.

○ National Assembly obeying the Constitution for the first time in 12 years

After intense war of nerves over a revision bill of the tax law that was designated as an auxiliary bill for revenue budget, the ruling and main opposition parties chose to approve the original bill submitted by the government. As critics argued the provision to place visual images warning against smoking on cigarette packages is not related to state budget, the rival parties agreed to discuss the issue later on, and approved the original plan to hike the tobacco price by 2,000 won per pack. However, they agreed to drop a plan to increase the tobacco price in conjunction with inflation.

In addition, the rival parties devised and approved a revision bill that calls for changing tax deduction of monthly rent, which was not included in the income tax law designated originally as an auxiliary bill, into tax credit and for expanding the scope of people eligible for the tax credit, in order to continuously reduce financial burden weighing on the livelihood of the working class. Also, the parties agreed to extend by two years the expiry of tax deduction for credit card use and other spending from taxable income, and approved the measure at the plenary session on the day. They also included a measure to temporarily raise the rate of tax deduction for debit card use and cash payment receipts, and to lower the ratio of tax credit for conglomerates’ R&D expenses.

○ ‘Super budget’ meant to shore up economy approved

The National Assembly approved almost intact a ‘super budget’ entailing 376 trillion won (339 billion dollars), which the government sought to fix in order to stimulate the economy next year. The National Assembly approved on the day a budget worth 375.42 trillion won (338.00 billion dollars), about 580 billion (522 million dollars) short of the original budget plan submitted by the government.

Most budgets for major projects that the Park Geun-hye administration is pushing to implement were mostly reflected in line with the original bills, but the parliament cut almost 200 billion won (180 million dollars) from budget for the Defense Acquisition Program Administration, which has been under fire for corruptions in defense procurements. Earlier, the parliamentary National Defense Committee approved DAPA’s budget including weapons development and purchases that called for a 100 billion won (90 million dollars) increase from the government’s original budget plan.

The National Assembly also cut about 300 billion won (270 million dollars) from the budget related to the four-river restoration project and the overseas energy development project, in the wake of the opposition party’s demand for parliamentary inspection of the government into so-called ‘Sajabang (four-river restoration, energy diplomacy, and defense corruption).’

The parliament also decided to indirectly subsidize from the state coffers 470 billion won (423 million dollars) to the Nuri (free education of children aged three to five) program budget, over which the rival parties were in intense last-minute conflict. Originally, the Education Ministry analyzed that the net increase of budget due to the program would reach 523.3 billion won (471 million dollars), but the National Assembly took into consideration 50 billion won (45 million dollars) of unused fund to be carried over to next year, and thus decided to provide about 60 billion won (54 million dollars) in interest for issuance of provincial government bonds.