The South Korean government laid out comprehensive pump-priming measures worth 20 trillion won in order to stimulate the domestic economy and consumer spending impacted by the coronavirus outbreak. The measures include everything from spending coupons and cash grants to tax cuts.
Finance Minister Hong Nam-ki held a joint briefing at the Government Complex in Seoul on Friday and announced a package of special measures to fight COVID-19. Hong said the package includes special measures as the current situation is an “economic emergency,” where community-level transmission of COVID-19 is severely affecting the economy.
Most of the measures announced on Friday are focused on stimulating consumption. Between March and June, the government will double the income tax deduction rate for credit card/debit card usage. Credit card usage deduction is available for the aggregate personal expenditure billed on credit cards or cash of a taxpayer that exceeds 25 percent of their gross income. The government is temporarily expending the tax benefit.
Childcare subsidy of up to 500,000 won will be given to parents, who are reluctant to take family care leave due to financial difficulties. Those working parents, who have to look after their children as kindergartens and nurseries are closed due to COVID-19, can take family care leave and apply for childcare subsidy. The measure is subject to workers with children aged 8 or under and will continue until COVID-19 ends.
The special consumption tax cut on purchases of passenger cars, which ended at the end of last year, will temporarily be extended to June. The consumption tax on passenger car purchases will be cut by 70 percent from the current 30 percent and the reduction limit will be 1 million won (1.43 million won including education tax and value added tax). If a consumer buys a 30-million-won car, the special consumption tax he or she needs to pay will be slashed from the current 2.15 million won to 720,000 won.
Spending coupons are newly created and expanded as well. If elderly workers receive 30 percent of their pay in the form of regional gift certificates, they will be given additional gift certificates worth of 20 percent of their pay until April. For example, if an elderly worker, whose monthly pay is 270,000 won, receives 189,000 won in cash, he or she will be given gift certificates worth of 140,000 won instead of 80,000 won. Vacation coupons, which are given to people traveling within the country, will be offered to 120,000 from the current 80,000. Also, tourist voucher worth of 100,000 won will be given by lot to those who post pictures of their travel on their social media.
In addition, the value added tax levied on small business owners operating less than 60 million won a year will be cut to the level of simplified taxpayers. According to government estimates, about 900,000 business owners can save up to 800,000 won in tax. Local assemblies are planning to vote for a scheme exempting businesses affected by COVID-19 from their property tax and comprehensive real estate holding tax. A total of 3.2 trillion won will be injected to help small and medium-sized businesses and small business owners.
Choong-Hyun Song firstname.lastname@example.org · Dong-Hyuk Kim email@example.com