Dispute Erupts Over Rumored Delay of Tax Cuts

The business community yesterday weighed in on the dispute over tax cuts, a controversy that has pitted political circles against each other.

The Korea Economic Research Institute under the pro-management Federation of Korean Industries urged a smaller and more efficient government through tax and spending cuts, saying, “Delaying income and corporate tax cuts is tantamount to eating seeds to be planted next year.”

Strategy and Finance Minister Yoon Jeung-hyun triggered the controversy at the National Assembly’s Strategy and Finance Committee June 29 and Monday by saying, “(The argument for a delay in tax cuts) deserves serious consideration.”

With the budget deficit increasing due to the government’s expanded fiscal spending to overcome the economic crisis, opposition parties and certain members of the ruling party had urged postponement of the tax cut plan to secure fiscal soundness.

A senior official in the ruling camp criticized Yoon’s comment, saying, “His comments could compromise the basic tax policy direction established by former Finance Minister Kang Man-soo, who is in charge of the National Competitiveness Committee,” adding, “This shows the differing views between the incumbent economic team and the former.”

A close confidant of President Lee Myung-bak said, “The Strategy and Finance Ministry briefed the president on the need for tax cuts late last month and he agreed,” adding, “The scrapping of the plan will be viewed as self-denial by the government.”

To this, the ministry said nothing will be changed officially but fell short of giving an explanation over Yoon’s intentions.

A tax expert said, “If the government, which is supposed to play the role of balancer, is in confusion, tax policies will run adrift and undermine state efforts to revive the economy,” adding, “Political circles should end this wasteful debate immediately.”

witness@donga.com koh@donga.com