Ruling Party, Government and Cheong Wa Dae: "25 Trillion Won Supplementary Budget, Using Excess Tax Revenue Without Issuing Government Bonds"

The Democratic Party of Korea, the Government of the Republic of Korea, and Cheong Wa Dae, the Blue House decided on the 22nd to set the size of a supplementary budget in response to the surge in oil prices caused by the war involving Iran at 25 trillion won. The plan is to finance it entirely with excess tax revenue, without issuing any new government bonds, and to have it passed by the National Assembly of the Republic of Korea by April 10. ▶Related article on page 19
At a high-level policy coordination meeting held at the National Assembly of the Republic of Korea that day, the ruling party, the Government of the Republic of Korea and Cheong Wa Dae discussed the 25 trillion won supplementary budget, measures to respond to the Middle East crisis, ways to address tariff risks from the Donald Trump executive branch of the United States federal government, and preparations for the launch of the Jeonnam-Gwangju Integrated Metropolitan City.
■ 25 trillion won supplementary budget funded by excess tax revenue to directly support exporters and vulnerable groups
Kang Jun-hyun, senior spokesperson of the Democratic Party of Korea, said at a briefing on the outcome of the high-level policy coordination meeting, "We discussed a supplementary budget aimed at stabilizing the livelihoods of vulnerable groups directly hit by high oil prices, minimizing industrial damage, and stabilizing supply chains," adding, "It will be funded with expected excess tax revenue without issuing government bonds, and the size will be around 25 trillion won."
According to the Democratic Party of Korea, the supplementary budget will be submitted to the National Assembly of the Republic of Korea as early as the 31st of this month. The party is aiming for a plenary vote on the 10th of next month, after preliminary reviews by the Standing Committees on the 2nd and 3rd and a comprehensive policy inquiry by the Special Committee on Budget and Accounts on the 6th and 7th. Jeong Cheong-rae, leader of the Democratic Party of Korea, stressed in his opening remarks at the high-level policy coordination meeting, "We will process this supplementary budget at the fastest pace in history."
The supplementary budget will focus on direct support to ease the burden of fuel and logistics costs for small business owners, farmers and fishers, and export companies. Support will be differentiated so that vulnerable groups and local regions receive more generous assistance. Specific amounts and payment methods will be disclosed once the supplementary budget bill is submitted to the National Assembly of the Republic of Korea.
Funds will also be allocated to stabilize energy prices and minimize industrial damage. Measures include introducing alternative Naphtha to prepare for potential disruptions in the supply chain and expanding the Export Voucher Program (EVP) and special support through trade insurance to ease difficulties in maritime transport caused by a possible blockade of the Strait of Hormuz.
Alongside the supplementary budget, they reviewed the Government of the Republic of Korea’s all-out response to the Middle East crisis. The oil price cap system currently in place will be adjusted on the 27th, and, if necessary, fuel taxes will be cut and the crude oil supply disruption alert will be raised to the "Alert Level" stage. The government will also accelerate the release of strategic oil reserves in consultation with the International Energy Agency (IEA) and secure alternative supplies that do not pass through the Strait of Hormuz.
To stabilize the foreign exchange rate, the authorities will encourage funds invested in overseas stocks to flow back into the domestic market. They will support the launch this month of the Reshoring Investment Account (RIA) and an FX forward selling product for individual investors, and will also push legislative support such as the Three Foreign Exchange Stabilization Tax Bills.
The Three Foreign Exchange Stabilization Tax Bills are amendments to the Restriction of Special Taxation Act that include: allowing individual investors to deduct up to 100% of capital gains tax if they sell overseas stocks and reinvest through an RIA in domestic stocks; reducing capital gains tax on overseas stock investments when individuals invest in currency-hedging derivative products for the purpose of hedging foreign exchange risk; and raising the non-taxable inclusion rate for dividends from overseas subsidiaries from 95% to 100% to encourage repatriation of funds. These bills are scheduled to be submitted to the plenary session of the National Assembly of the Republic of Korea on the 31st.
■ Accelerating investment in the United States to avoid additional U.S. tariff burdens
In line with the implementation of the Korea-U.S. Strategic Investment Management Special Act (also referred to as the Korea-US Strategic Investment Special Act), the government decided to speed up follow-up measures such as enacting subordinate regulations and establishing the Korea-U.S. Strategic Investment Corporation. This is intended to prevent additional burdens such as renewed tariff hikes or new tariffs, as the Trump administration is pressuring South Korea to dispatch a warship to the Strait of Hormuz in response to the Middle East crisis. However, the issue of dispatching a warship was not discussed at the meeting.
They also reviewed preparations for the launch of Gwangju Metropolitan City. Before the local elections in June, the government plans to prepare subordinate regulations that reflect 78 provisions delegated to the Enforcement Decree and 149 matters delegated to ordinances under the special act.
uknow@fnnews.com Kim Yun-ho Reporter