How Can the Government Raise Eight Trillion Won?

It turns out that starting from next year until 2009, a budget of 23.2 trillion won is needed to carry out the government`s measures to expand the social safety net and to cope with the low birth rate.

However, the government has yet to come up with ways to raise eight trillion won out of the total.

According to the "Report on Fixed Budget Needed to Carry out Measures to Encourage Childbirth and to Expand the Social Safety Net and Methods to Secure Ways and Means" acquired by Dong-A Ilbo on October 17, the government has yet to secure 8.1 trillion won, or 35 percent, out of the additional necessary budget of 23.2 trillion won. To break down the figures: for the central government, 4.3 trillion won out of 13.9 trillion won is needed, and for regional governments, 3.8 trillion won out of 9.3 trillion won must be secured.

The report compiled by the Ministry of Finance and Economy and the Ministry of Planning and Budget was issued in early September at the meeting attended by ministers in charge of the birth rate and the social safety net. The meeting was chaired by Prime Minister Lee Hae-chan.

The government considered issuing government bonds, introducing a childbirth encouragement tax, and raising tax rates in order to fund its plan. However, the government has not made a final decision on how to raise funds because it is feared that each of these plans may bring about side effects.

The Ministry of Finance and Economy views that the optimal method to secure ways and means is to adjust the existing expenditures and to reduce tax exemptions.

The idea is that an issuance of government bonds will end up adding to the burdens of future generations, and a childbirth encouragement tax can provoke resistance against taxation.

However, in a related ministers` meeting on September 29, Prime Minister Lee ordered the consideration of introducing a childbirth encouragement tax if necessary.

According to a report, Prime Minister Lee instructed, "After all, ways and means are earmarked taxes annexed to existing tax items. Consult with the Ministry of Finance and Economy on whether to split and annex a childbirth encouragement tax to multiple tax items like the education tax is now, or attach it to a tax item with significant revenue.”

However, a senior official at the Ministry of Finance and Economy said, "Although there are many people who insist on the necessity to create an earmarked tax to encourage childbirth, we have to exercise caution when a new tax item is being considered."

legman@donga.com