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[Editorial] Irresponsible “Big Government” Ceaselessly Raises Fiscal Deficits

[Editorial] Irresponsible “Big Government” Ceaselessly Raises Fiscal Deficits

Posted August. 24, 2007 07:29,   


The government’s fiscal deficits for this year are predicted to reach 13.6 trillion won, the biggest figure in eight years since 1999, right after the financial crisis. Under the current government, the “adjusted fiscal balance,” which recorded only one surplus of 1 trillion won, back in 2003, showed a widening deficit gap growing every year since 2004, and now the accumulated deficit has surpassed 3.5 trillion won.

Next year’s budget is expected to increase by 7 to 8 percent, the biggest increase in six years. Whenever the current government faces criticism of being a “big government,” it defends itself on the pretext of “trying to be a reliable government.” However, it has been a long time since the government took notice of public opinion. The government plans an increase of 1,000 public servants with a six-month tenure. Since taking office, the number of public servants have increased by as many as 41,000. When the number of public servants increases, administrative regulation follows suit. This will lead to a double or threefold burden. With a welfare system which gives money away ill-considerately and pours tax payments ceaselessly into implementing the strategy for the unrealistic balanced regional development, the current government will have contributed, by the end of this year, to a national debt that stands at over 301 trillion won. This figure was 133 trillion won at the end of the Kim Dae-jung administration.

As presidential Election Day draws closer, the profligate spending government issued its tax revision bill on deducting taxes for next year. The change of the standard of assessment for income tax rate itself cannot be blamed. Even though the number of taxpayers who faced the maximum income tax rate, or 35%, have surpassed 50,000 as of 2005 due to the growing economy scale and inflation, the standard of assessment which has been applied since 1996, remained unchanged for twelve years. So technically, the government has levied more tax than the reasonable level.

Increasing the succession deduction when small and medium entrepreneurs inherit their business to their children sounds reasonable as well. However, rather than changing the standard of assessment in the beginning of their term, the government was preoccupied with squeezing more tax. It has acted “selfishly” in deducts tax which the next government will have to charge anyway. Having had no original plans to change the rules of governing the tax base, the government’s sudden turn-around on taxation is seen as a sop for the election, which was entirely of its own making.

Furthermore, without any moves to revise expenditure structures, as is the case in advanced nations which are reducing the number of public servants and cutting unnecessary budgets, just cutting some income tax rates will not be enough to ease the overall tax burden. When government expenditure rises, so will it empty the pockets of the taxpayers even more. This will aggravate government expenditure usage further which is already mired in fiscal deficits. The Roh Moo-hyun government seems to be leaving a vicious legacy for the next government.