The Korean government will maintain its expansionary economic policy until next year, while reducing the burden on the corporate sector of greenhouse gas emission trading system by either postponing its implementation until next year or cutting the penalties. Also, it is planning to deal with youth unemployment mainly by deregulation of the service industry.
Deputy Prime Minister and Minister of Strategy and Finance Choi Kyung-hwan held a press conference on July 28 to announce that he would maintain expansionary fiscal and monetary policy until the end of 2015, or later if necessary. “The purpose of the expansion is to ensure the national economy gets on a growth track and the tax reform policy, which will be made public soon, will share the same goal,” he said.
He also mentioned that the greenhouse gas emission trading system will not be put in place until January 1 next year, or the penalties on companies will be reduced. “We will be considering various factors such as the international trends and consensus, because the implementation of the system has to be in step with those of other countries,” he commented.
Regarding youth unemployment, he promised to cope with the problem by relaxing regulations in the service industry, ranging from financial and education to medical, tourism, and digital content. “Korea’s conditions are different from those of the U.S. and Japan, where extremely low interest rates are in place,” he said with regards to the possibility of interest rate cut, adding, “Still, the monetary authorities will keep a flexible stance in view of the adverse economic situation as of late.”
He also explained that his economic team is trying to improve the taxation on internal reserves policy, which is facing of strong opposition from the business community, by reflecting the reality and specific tax rates. Standards will be announced along with the tax reform plan in early August. “At present, we are not planning to increase the corporate tax, since the tax is higher than in most of the other OECD member countries,” he affirmed, “However, some measures will come out so that the effect of corporate tax reduction can spread wide.”
In the meantime, he expressed concerns over the current situation in the housing market, in which the rent prices are equivalent to 70 percent or so of the housing prices. “I cannot understand the situation, and I believe that the housing market should be stabilized first if the general public’s pain for housing costs is to be addressed,” he commented. The Deputy Prime Minister added that his team will be committed to deregulation to the point of the effect being directly sensed by the public.