The Park Geun-hye administration has been reluctant to raise taxes on the corporate sector. Its policy might have been an urgent choice when it came to vitalizing the sagging economy by relieving enterprises of tax payment burdens.
For households, the high-income bracket had somewhat lower taxes on property, compared to past administrations.
President Park’s dovish taxation stance has caused shortage in state tax revenue, which has paradoxically clashed with her commitment three years ago to expand public welfare.
Free child care and kindergarten education for those aged 3-5 was one of her campaign pledges during the 2012 presidential race.
But the lack of funding has triggered a standoff between the central government and regional education offices over financing the program, thanks to an ambiguous law.
The state-initiated Nuri Curriculum is a universal child care service. An ordinance on childhood education revised in 2012 mandates local governments nationwide to fund the Nuri program.
But the current law stipulates that child care centers are classified as nurseries, which come under the purview of the Ministry of Health and Welfare. As a result, while the ordinance says regional education offices are obliged to pay for the child care programs, the law does not mandate it.
The central government and local education offices are seeking to offload the responsibility onto each other, leading to a war of words among political parties ahead of the April 13 general election.
Seven education offices — Seoul, Gwangju, Sejong, South and North Jeolla provinces, Gangwon Province and Gyeonggi Province — have yet to pledge full financial coverage of the subsidy program.
The central government claimed that the money for the Nuri program should come from the 41.2 trillion won ($34.6 billion) budget already allocated for the country’s 17 city and provincial education offices in 2016, marking a 1.8 trillion won increase from the year before. Officials also stressed that a plan to inject an additional 300 billion won was passed by the National Assembly.
But an official from a provincial superintendent said the 1.8 trillion won budget increase was “not even enough to cover the increase in payroll” of education workers.
Park has continued to reaffirm her position on the tax issue. She compared imposing a tax that does not help revitalize the economy to building a castle on sand.
However, her initiative of “welfare without tax hikes” has involved a repeated overestimation of tax revenues each year to match the increase in spending.
In the five-year state fiscal spending management plan announced in 2012, the administration expected to collect 1.29 quadrillion won during Park’s presidency, with an 8 percent rise every year.
But it cut the estimated tax revenue to 1.19 quadrillion won in 2013. Then, it further slashed the figure to 1.12 quadrillion won in 2014.
