Lee Hyungil: "Active Fiscal Policy Needed... Can Be Harmonized with Sustainability"

Yonhap News Agency

Lee Hyungil, nominee for Deputy Prime Minister for Economic Affairs and Minister of Economy and Finance, stated on the 13th, "While fiscal sustainability is important, it is also necessary for fiscal policy to play an active role in responding to external uncertainties and the structural challenges of our economy."

In written answers submitted to the National Assembly ahead of his confirmation hearing scheduled for the 15th, Lee said, "I agree with the need for institutional mechanisms to enhance fiscal sustainability." However, he added, "We should also consider the fact that countries around the world are currently suspending or easing the application of fiscal rules in the wake of the pandemic."

He emphasized, "Active fiscal participation and the pursuit of fiscal sustainability can be harmoniously achieved through performance-oriented fiscal management."

He also expressed the view that expansionary fiscal policy can create a virtuous cycle of growth and fiscal soundness. Lee assessed that since President Lee Jaemyung took office, the government's fiscal management "has been generating outcomes." Regarding this year's and next year's budgets, he explained, "We are actively utilizing fiscal policy with a focus on addressing structural issues such as enhancing potential growth rates and easing polarization."

Reflecting on his experience during the pandemic as Director-General of Economic Policy and Vice Minister at the Ministry of Strategy and Finance, the predecessor to the current Ministry of Economy and Finance, he noted that his work in supporting people’s livelihoods and responding to economic conditions was significant. He added, "At that time, fiscal and financial support contributed to backing household income and small business operations and helped alleviate reduced consumption and instability in the financial market."

However, he pointed out that, "During the pandemic, the rapid increase in debt among small- and medium-sized businesses and small business owners was partly due to financial support measures." To address this, he said, measures such as promoting debt restructuring for financially vulnerable borrowers in times of rising interest rates and expanding support for SMEs and small business owners are currently being pursued.

Regarding the potential introduction of a capital gains tax, including the Financial Investment Income Tax, he took a cautious stance, stating, "This is a matter that should be considered only once market conditions have stabilized sufficiently." He added that related systems would be updated to adapt to changes in financial markets and industry, and that the government intends to establish a fair and efficient system of financial taxation.

On inheritance and gift taxes, he stated, "There are arguments that Korea’s relatively high inheritance tax rates suggest tax relief is needed, but there are also positions that such relief would be inappropriate due to factors such as growing asset inequality and the need to improve the fairness of taxation." He continued, "We need in-depth discussions that take into account diverse opinions, social consensus, the fiscal situation, and the intended beneficiaries."

As for corporate taxes, he announced, "While continuing to provide growth-friendly tax incentives to enhance national competitiveness—such as fostering future growth drivers, supporting advanced industries, and promoting region-driven growth—we will also restructure tax exemptions and reductions that are not effective, in order to secure a stable revenue base by reflecting changes in economic and industrial conditions."

To prepare for the taxation of virtual assets, which will begin in January next year, he explained, "Detailed tax criteria will be publicly announced by the National Tax Service within this year, and measures will be taken so taxpayers encounter no difficulties with filing."

While some have pointed out that classifying virtual assets as 'other income' is inappropriate, he responded, "The classification as other income is suitable so as to apply tax measures advantageous to taxpayers—including comprehensive income taxation, the alleviation of tax compliance costs, basic deductions, and a single tax rate."

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