Special Excise Tax to Be Scrapped


By Lee Chi-dong
Staff Reporter
The government on Wednesday unveiled tax incentives aimed at creating more jobs and boosting domestic consumption ahead of the crucial National Assembly contest in April.

In a report to President Roh Moo-hyun at Chong Wa Dae on Wednesday, Kim Jin-pyo, deputy prime minister and finance-economy minister, said companies will be given 1 million won in tax refunds for every worker they recruit over the average number of full-time workers of the past two years.

At the same time, all special excise taxes will be abolished with the exception of automobile, air conditioners and fuel products, which is expected to help open the purses and wallets of consumers. Accordingly, the retail prices of golf clubs and jewelry will fall by up to 20 percent.

Tax exemption on savings by senior citizens above the age of 65 will be expanded, Kim reported to Roh in his macroeconomic plan for the year.

The finance minister said the plan would be implemented as soon as it receives the endorsement of the National Assembly, which is expected to be before June. However, a bumpy road lies ahead for the tax cut plans, as critics argue they are nothing more than populist-style policies aimed at wooing voters and appeasing businesses ahead of the upcoming general elections.

The minister said the economic team will put priority on three major issues this year: rising unemployment rates, financial market instability and delayed handling of a trade pact with Chile.

Ahead of the parliamentary contests in April, the Roh administration has been going all-out to resolve the rising jobless problem, especially for young voters.

The youth jobless rate recorded 7.7 percent last year, the highest since 1999 when 10.9 percent of young job seekers failed to find jobs in the aftermath of the 1997-98 economic crisis.

Policymakers believe that job creation is the best way to promote public welfare and narrow the ever-widening income gaps.

With this in mind, they have already set a goal of creating some 350,000 jobs this year alone by encouraging businesses to expand investment and nurturing the service industry.

The service sector accounted for only 55 percent of the gross domestic product in 2002, far below the 70 percent level in advanced countries.

On the other hand, the industry created 4.5 million jobs over the last decade, while the manufacturing sector lost 780,000 workers.

``The economic team will do its best to square away the problems this year,’’ Kim said.

In addition, the government will reinforce its monitoring of financial companies to eliminate loopholes for money laundering.

The minister said the government will keep to the current expansionary macroeconomic policy for the time being, through the frontloading of budget spending and low interest rates, to offset dull consumption.

lcd@koreatimes.co.kr