President Park Geun-hye urged economic policymakers to swiftly draw up plans to raise additional budget and seek National Assembly approval to spur employment, investment and the livelihoods of the middle class.

“Foremost, a supplementary budget should be devised as soon as possible to revitalize the economy and that could help normalize (the government’s) tax revenue,” President Park said in an economic briefing by the Ministry of Strategy and Finance on Wednesday.

“The budget should be drawn up focusing on creating jobs and improving the livelihoods of the middle class,” the country’s chief executive added.

The Finance Ministry recently unveiled its fiscal stimulus measures with growth projections lowered to 2.3 percent from 3 percent this year and the number of jobs at 250,000 from 320,000.

It also forecast a loss of about 6 trillion won in tax revenue this year due to the prolonged economic slowdown.

The ministry is expected to raise an additional budget of 12 trillion won, while spending 60 percent of its existing budget devised by the previous administration by the end of June this year to finance job creation and small and medium enterprises.

President Park reiterated the importance of sustaining the economy through the convergence of IT and science, while encouraging venture start-ups as these will increase job creation especially for the young and the old.

Economic democratization in which conglomerates and SMEs can grow together was also emphasized by the president to the Finance Ministry in devising the supplementary budget and implementing the stimulus measures.

She also urged a swift implementation of the Land Ministry and Finance Ministry’s comprehensive real estate revitalization measures that included capital gains and purchase tax cuts on housing transactions.

Deputy Prime Minister and Finance Minister Hyun Oh-seok led the briefing introducing a detailed set of plans that included requiring providers of goods and services to issue cash receipts for transactions of more than 100,000 won, down from 300,000 won. Cash receipts are filed and recorded at the National Tax Service.

Also, the ministry will move to revise a law to issue tax invoices to private or self-employed enterprises with annual sales of 300 million, down from 1 billion won, as a means to secure tax income for the government.

The Finance Ministry will bring a legislative revision before the National Assembly allowing a tax levy on derivatives transactions, despite opposition from financial companies and regulators, including Financial Services Commission Chairman Shin Je-yoon.

Shin said in a confirmation hearing last month that such transactions tax could negatively affect the derivatives market by driving investors away from domestic futures and options trading to overseas.

However, the ministry said it could generate over 100 billion won in tax revenue.

It plans to reintroduce a set of measures allowing companies to receive various tax breaks and credits when they increase recruitment or when they change the status of their existing part-time or non-regular workers to full-time regulars as part of efforts by the incumbent administration to achieve a 70 percent employment rate.

The Finance Ministry said the country will be able to grow around 3 percent in the second half of this year after the implementation of its fiscal stimulus plan, with hopes of reaching around the upper 2 percent growth in 2013.

In its policy report to the President, the FSC said chief executives in the financial sector will be subject to heavier regulatory sanctions should their financial firms undergo network glitches from weak cyber security.

The FSC said it would not tolerate network paralyses from hackers’ attacks or others in the financial sector, which involves commercial banks and credit card issuers.

The regulator’s policy comes after customers of Shinhan Financial Group and Nonghyup Financial Group recently suffered inconvenience from breakdown in their network systems including automated teller machines and the Internet banking.

“While a CEO in the industry had enjoyed milder punishment compared to a regulatory disciplinary action against the institution (his financial firm), the figure will also be reprimanded with the same-level sanction,” the FSC said.

In a former case, Ted Chung, CEO of Hyundai Card and Hyundai Capital could avert a tough sanction though the personal information of about 420,000 customers and passwords of 13,000 customers were stolen by hackers in 2011.

Concerning its policy to retrieve public funds, the FSC said it would map out a roadmap to sell Woori Financial Group during the first half.

Financial authorities have recouped only about 5 trillion won ($4.5 billion) of the total 12.7 trillion won in taxpayers’ money, which was injected into Woori Financial after the 1997 Asian foreign exchange crisis.

While the regulator also said it plans to draw up guidelines to establish a financial consumer protection board by June, it has yet to clarified whether the board will be spun off from the Financial Supervisory Service, an executive arm of the FSC, as an independent entity.

FSC vice chairman Chung Chan-woo told reporters that “consumer protection is a key state project of the Park Geun-hye administration.”

The National Tax Service ― in its separate policy briefing to Park ― said it will sharply raise the upper ceiling of fines for tax evasion from the current 5 million won to 300 million won for each attempt.

While the tax authorities’ plan should go through a revision of the laws at the National Assembly, it reflects the new government’s commitment to cracking down on the underground economy.

The Korea Customs Service unveiled its policy in a briefing that it will bolster inquiry into trading firms by raise its random investigation ratio from the current 0.15 percent of trading companies to 1 percent by 2017.

By Park Hyong-ki and Kim Yon-se
(hkp@heraldcorp.com) (kys@heraldcorp.com)