Democratic Party of Korea floor leader Ahn Do-geol announced National Finance Act amendments at a press conference at the National Assembly this afternoon, stating the reforms will establish a fiscal management system that proactively responds to tax revenue volatility and transform surplus revenue into national competitiveness. Ahn projected that if next year's semiconductor boom and stock market activation continue, additional tax revenue of up to 100 trillion won beyond the original National Fiscal Management Plan forecast could occur. The current National Finance Act lacks clear provisions requiring the government to revise revenue budgets or readjust finances through National Assembly deliberation when large-scale surplus or shortfall occurs during the fiscal year.
Current System Lacks Mid-Year Adjustment Provisions
Ahn pointed out that while tax revenue volatility has significantly expanded, South Korea's fiscal management system remains stuck in past frameworks. He stated that the current National Finance Act contains no clear regulations requiring the government to revise revenue budgets or readjust finances through National Assembly deliberation when large-scale surplus tax revenue or tax shortfalls occur during the fiscal year. As a result, when tax shortfalls occur, the government has responded by significantly cutting or processing as unused the projects deliberated and confirmed by the National Assembly based on executive branch judgment, instead of pursuing revenue correction supplementary budgets. Ahn noted this approach effectively neutralizes the National Assembly's budget confirmation authority and significantly reduces the predictability of fiscal management.
Conversely, when surplus tax revenue occurs, most is processed as fiscal surplus without timely utilization, being used primarily for local allocation tax settlement and national bond repayment. While these are necessary purposes, the institutional limitations cause the loss of valuable financial resources that could be used for strategic investment for the future and economic response.
Ahn Proposes Three-Part National Finance Act Reform
Ahn announced the Democratic Party will pursue three institutional improvements through National Finance Act amendments to change the fiscal management paradigm. First, the party will mandate supplementary budget formulation including revenue correction and expenditure adjustment when tax revenue changes above a certain scale occur. Second, the party will establish a 'Future Response Fund' that accumulates part of surplus tax revenue generated during tax boom periods in a fund, creating a fiscal safety device to be used when economic recession or tax shortfalls occur. Third, part of the fund reserves will be used for expanding future growth engines and national strategic investment.
Ahn specified that the law will clearly stipulate the fund can be used only for strategic projects that enhance national competitiveness, including fostering future industries such as AI and semiconductors, alleviating asset and income polarization, and balanced regional development.
Government Cut 50 Trillion Won Spending in 2023 Tax Shortfall
According to Ahn, the government adjusted approximately 50 trillion won in spending while responding to a tax shortfall exceeding 56 trillion won in 2023. This historical precedent demonstrates the scale of unilateral spending cuts the executive branch implements without supplementary budget processes when facing revenue shortfalls.
FAQ
What did Ahn Do-geol propose at the National Assembly press conference?
Ahn Do-geol proposed National Finance Act amendments consisting of three reforms: mandatory supplementary budgets when significant tax revenue changes occur, establishment of a 'Future Response Fund' using surplus revenue during boom periods, and strategic investment in AI and semiconductors using fund reserves.
How much did the South Korean government cut spending in 2023?
The government adjusted approximately 50 trillion won in spending while responding to a tax shortfall exceeding 56 trillion won in 2023, according to Ahn Do-geol.
