Gov’t, GNP Conflict Over Economic Policies

The Lee Myung-bak administration put a brake on the economic policies supported by the governing Grand National Party (GNP) in the extra seating of the National Assembly this April, citing the need to be more cautious or refusing to accept 11 out of 12 tax cut bills.

The GNP has intended to maintain a small government and proposed to cut taxes, while the government showed reluctance to accept the proposal, for fear of tax revenue reduction. As the two find themselves difficult to narrow the opinion gap, they seem to be on a collision course at the moment.

The government also announced that it would approve only four out of 54 bills the GNP has said it would support in the April special session of the National Assembly. It refused to accept 26 bills, expressed its willingness to accept six bills on condition of revision, and cited the need for separate proceedings for four bills and other reasons for 14 bills.

Meanwhile, the GNP also turned the cold shoulder to the bills backed by the government in the April session of the parliament, refusing to take 13 out of 52 bills and citing the need to make up for or take caution.

The result came from the consultation meeting for pending bills at the April parliament, held on Wednesday in a meeting with GNP policy chief Lee Han-koo, the chief officer of Prime Minister, and 17 vice ministers. According to their report, the Strategy and Finance Ministry approved only one revised Tax Reform Act that would lower the minimum of corporate tax rates to eight percent from the current 10 percent, out of the 12 tax cut bills proposed by the GNP.

On the GNP proposal to expand tax cut rates to restaurants and lodging businesses, and add children’s items on the exemption list of value-added tax (VAT), the ministry expressed it is difficult to accept the measures, saying that those bills would result in tax revenue reduction, and pose a problem in the principle of equity in taxation.

The government also showed lukewarm responses to the other GNP proposals including providing income and corporate tax cuts for small and medium enterprises participating in the culture industry; exemption of a special excise tax on LPG for the disabled; tax deduction for admission donation; and expanding tax cut rates to 20 percent for R&D.

ditto@donga.com