[Tax Column] Strategy and Finance Committee Passes Budget-Related Bills... Government's Corporate and Education Tax Proposals Head to Plenary Session

No Compromise Reached on Corporate and Education Tax Dispute
Ruling Party: "Opposition Conceded... Effectively Passed by Consensus"

On November 30, all budget-related bills except for the proposed increases in corporate tax and education tax passed the Planning and Finance Committee of the National Assembly. The government’s proposals for raising corporate and education taxes, which failed to reach a bipartisan compromise, will be submitted to the plenary session as originally drafted.

The committee convened both a tax subcommittee and a full committee meeting in succession on this day, approving the budget-related bills under its jurisdiction. According to the National Assembly Act, the Special Committee on Budget and Accounts and the relevant standing committees must complete their review of the budget and related tax bills by November 30 each year. If the review is not completed within the deadline, the bills are automatically referred to the plenary session on December 1.

The proposal to increase each corporate tax bracket by 1 percentage point and to raise the education tax imposed on financial and insurance companies with annual revenues exceeding 1 trillion won by 0.5 percentage points to 1 percent was not tabled due to a lack of agreement between the ruling and opposition parties.

The Democratic Party of Korea insisted that the government’s proposal should be implemented as is, citing a shortage of tax revenue. The People Power Party argued that, regarding corporate tax, the lower tax brackets for small and micro-sized enterprises should be excluded to reduce their burden. Regarding the education tax, they contended that applying a progressive structure to this indirect tax would be inconsistent with the existing taxation system, and expressed concerns about the potential for costs to be passed on to consumers, calling for a cautious review.

After the two bills failed to reach a consensus in the tax subcommittee, Democratic Party floor leader Kim Byungki and People Power Party floor leader Song Eonseok continued negotiations until the morning of the 30th, following discussions on the 28th, but were unable to reach an agreement.

Yonhap News Agency

Park Sooyoung, the People Power Party lawmaker who chairs the tax subcommittee, told reporters before the meeting, "If we do not approve the budget-related bills, the government’s proposals will automatically be submitted to the plenary session. We are not putting the corporate and education tax increase proposals to a vote at all."

After the full committee meeting, Democratic Party lawmaker Jung Taeho, the ruling party’s secretary on the committee, explained to reporters that the contentious bills would be submitted to the plenary session as per the government’s proposal, saying, "From the government’s perspective, this was a matter of normalizing the tax system, so there was no room for compromise."

He added, "It could also be seen as a concession by the People Power Party, since they could have chosen not to convene the committee at all." Both the tax subcommittee chair and the Planning and Finance Committee chair (Im Ija of the People Power Party) are from the People Power Party, so if they had not called the meetings, as in previous years, the review and processing of the bills could have missed the legal deadline.

Jung further stated, "In any case, the most significant point is that this time, the ruling and opposition parties essentially passed the bills perfectly through consensus."

Therefore, at the additional meeting between floor leaders Kim Byungki and Song Eonseok scheduled for later in the afternoon, negotiations are expected to focus not on renegotiating the corporate and education tax bills, but rather on budget items where the parties remain divided, such as investment in the United States, special activity funds for the presidential office, and local gift certificates.

Meanwhile, the bill for separate taxation of dividend income, which was agreed upon by both parties, passed the full committee. However, Democratic Party lawmaker Jin Sungjoon requested that his opposition to the separate taxation be officially recorded, and Planning and Finance Committee chair Im Ija instructed that his minority opinion be included in the official minutes.

This content was produced with the assistance of AI translation services.