尹The government’s first price measure requires a general tax cut beyond the ‘flexible tax’
The key is whether to maintain a ‘market-friendly policy’ even if public opinion pressure increases
Overseas supply factors, countermeasures are not enough… Reduce government spending
photo = Yonhap News
The first meeting of economic ministers under the Yun Seok-yeol administration was held yesterday, presided over by Choo Kyung-ho, Deputy Prime Minister and Minister of Strategy and Finance. It was a place to finalize the ‘high price countermeasures’ that had been swarming around the Ministry of Finance. At the end of the meeting, a long-named material was announced, which was prepared in advance, called ‘Ten Urgent Livelihood Stability Projects for the Stabilization of People’s Livelihoods’.
Overall, tax cuts are covered. There are several government measures that can be implemented at Yeosoya University without going through the legislative process of the National Assembly. It is necessary to look back on yesterday’s meeting as a touchstone from which the government’s response stance and future direction can be measured in relation to the recent high inflation, which is concerned about stagflation beyond inflation.
The direction of tax cuts can be said to be a standard play as a countermeasure against high inflation during a recession. Such is the case with the plan to induce price cuts for 14 items, including pork, cooking oil, and coffee, by actively utilizing the flexible tax quota tariff system. Exemption of VAT on raw water imports such as coffee, cocoa, and expansion of VAT exemption for simple processed foods such as kimchi and soy sauce are also seen as positive interpretations of agricultural products. Of course, from now on, government spending should also be reduced.
There is no need to immediately raise the issue just because we are going to a tax cut. Taxes can be responded to by raising the tax rate when the economy is revitalized. First of all, it is important to revive the economy. The quota tariff is implemented for that purpose. It is very resilient to make the supply and demand very smooth or to prevent oversupply. A temporary cut in the fuel tax in response to the recent soaring international oil price is also a method of operating the fuel tax system as a flexible tax.
‘Freedom’, which I repeatedly shouted when I took office, must be implemented as a policy
However, even if the Yun Seok-yeol government implements price measures, it needs to be slightly different. Since he took office as president, he has called for ‘freedom’ so strongly that he has to take responsibility for it. The price policy is no exception. In other words, it is important that the measures should be market-friendly even when ‘inflation response’ and ‘preparation for high inflation’ are established. Consistency must be maintained in such a basis. It is also important to look at the market and price (inflation) from a mid- to long-term perspective.
The tax cut is just the beginning. The corporate tax also needs to be lowered. This is because it becomes an international comparison and is a major factor in attracting corporate investment. Income tax also needs to break away from the old frame of taxation on the rich. It is also necessary to normalize the punitive property tax. The inheritance tax on corporations needs to be revised in terms of maintaining employment and the succession and development of accumulated technology, while the inheritance tax on personal assets is realistic in line with the growing economic scale.
All of them must be followed by amendments to the law. Of course, the cooperation of the National Assembly is required. However, as the government is doing the proposal of the bill, only the people should look at it. Even if it’s hard, it can’t be helped If you blame the National Assembly, what the Yun government can do now is very limited.
High prices due to overseas supply factors, South Korea’s countermeasures are inadequate
It would be better not to over-indulge in price measures. Above all, the recent high inflation is largely attributable to international factors, that is, factors from overseas supply. Therefore, there is not much that the Korean government or companies can respond to in Korea. Despite this, the economically disadvantaged-centered consumers will continue to appeal for countermeasures, but the government must honestly explain this reality and double its efforts to seek understanding.
As a whale, it is difficult to eat all three meals in a bad year. Be wise, but you also need patience. What to do when the Ukrainian war has no end and raw material prices soar as the global supply chain itself changes due to the intensifying confrontation between the US and China. During the days of the tyranny, the king would have reduced his meal by at least one meal. Tighten the belt more and everyone should go tighter. Not to that level, households, businesses, and the government all have to make efforts to re-weave dry towels. Especially when the government must take the lead. This is true of the public sector as a whole. Wages, patronizing financial expenditures… There are many targets for austerity.
It won’t be easy. Whenever high prices become a problem, complaints and grumblings like “what the hell is the government doing?” will not cease. There is no distinction between the media, opposition parties and social groups. However, shaking and falling under this pressure will only make the situation worse. For example, let’s say that ward office officials and tax office employees create a joint animal enforcement team to circulate the market and crack down on prices. Can high prices be resolved by mobilizing the National Tax Service and the Customs Service to companies that raise product prices by arguing with sanitation issues in places like restaurants that have raised food prices like that? In other words, what can be gained from such a strong determination of the ’88 style’. It will only increase resistance to the government and tolerance for administrative surveillance. no effect You need to get rid of this temptation.
In order to overcome the temptation of price monitoring and enforcement and secure a stable supply chain,
If there is one area in which the government should strive, it is by far the securing of a stable supply chain. From flour, cooking oil, and meat to gas and oil. It is the government’s role now to prepare for the worst situation, where even if there is money, it cannot secure supplies. The Yun government’s ability to cope with inflation will also be judged here. If the supply is secured despite the price increase, it can eliminate the anxiety and prevent blockages in the distribution network.
It is also important for private suppliers, led by wholesalers and retailers, to free themselves from behaviors such as hoarding and manipulating excessive export volumes. Such pain sharing will greatly help in overcoming the current supply chain crisis and ultimately increase self-interest. However, if they only shout that this is the right direction and that it is necessary with the theory of justification, then the government is naive. The reality is that we cannot rely solely on such ‘goodwill of the market’ as in the past or present. Ultimately, it is a good way to prevent the side effects of the government securing a stable supply chain.
Looking at telecommunication rates, it seems that Korea’s unique ‘bureaucratic tradition’ of intervening in price intervention still remains. I hope the Yun government will break free from this temptation. Overall, the current price policy has become more difficult than it was during the previous government. The circumstances are unfavorable, but since I cried for freedom, I have no choice but to do so. Shouldn’t you be responsible? Instead, if you win well, your chance to receive more applause increases.
Editorial member Huh Won-soon huhws@hankyung.com