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Transparency should be the keyword for state budget management

Transparency should be the keyword for state budget management

Posted January. 02, 2015 09:43,   


The most important agenda set by the government in economic policies for the New Year is four major reforms in the labor, finance, public and education sectors. Economy Minister Choi Kyeong-hwan emphasized in the New Year’s speech, “Reform will feed the public. The mission of our time is to reform all the chronic evils.” To make a successful reform, it is essential for stakeholders to share the burden. The reform in four sectors would reap a fruitful result only when the government tightens its belt with strong commitment that “the government will transform first.” This is the reason why the Dong-A Ilbo launches an annual series titled "Account book of the nation, a matter of my concern."

According to the Dong-A Ilbo reporting team’s analysis on the 2,031 projects funded by the government subsidies and 263 non-taxable or tax-reduced/exempted items, over 8 trillion won (approx. 7.35 billion U.S. dollars) of tax was wasted by false subsidy claims or fruitless projects. The state subsidies amount to around 50 trillion won per year including the government-funded projects and the projects delegated to local governments. However, subsidies from the government coffer are regarded as "easy money" and frequently appropriated for inappropriate purposes. A representative case is a note saying “whoever takes money (subsidy) is the owner,” which was left in the office of Korea Economic Education Association that embezzled 3.6 billion won (approx. 3.3 million dollars) of the government subsidy under the excuse of economic education for young children.

Even worse, 1 trillion won (approx. 919 million dollars) was confirmed as the amount leaked from the state subsidies spent by the government itself in 2013. More tax money is wasted in the projects driven by local governments. In such projects, moral hazard has reached a serious level. A local autonomous entity received traditional market support fund under the pretext of making a parking lot, but spent the money for different purposes. Some bought cheap duty-free oil that was supposed to be used for farming but resold it to gas stations. Welfare budget that exceeded 100 trillion won a year is not spent for the needy, but leaked in illegal ways such as providing the pension to a person who passed away.

The government set up a measure to prohibit an entity to participate in the government projects and charge penalty amounting to five times of the illegally received subsidies at maximum, if the entity illegally appropriates the government subsidy. However, as seen from the defense industry corruption cases or irregularity scandals of nuclear power plants, fiscal theft is more serious in the government-funded projects. The problem is that there is no special way to confiscate illegally spent or wasted government fund. Although Anti-Corruption and Civil Rights Commission promised to implement the "Act to prevent false claim of public finance (False Claims Act)" in October 2014, the National Assembly didn’t start discussion yet. A comprehensive measure must be established to eradicate corruption that eats into the government budget. In order to stop waste of tax and spend the budget more effectively, the government and local authorities must frugally spend and save the fiscal budget as they do with their own household budget.