Economic policy in chaos due to continuous ‘headwind’
Kwon Dae Gyung | kwon213@ | 2018-02-12 10:33:14

The government economic team of Moon Jae-in is actively pushing for various economic democratization policies such as stabilization of real estate market, raise minimum wage, and reform of tax system, but pointed out that difficulties are getting worse in the market. In the early days of the regime, there is a growing voice of unilateral domination of the economy, which is receiving major externalities such as households and corporations.

Analysis of the major core economic policy trends of Moon Jae-in economic team on February 11 revealed that many of them were confused by the fact that they were not welcomed in the field due to semi-market factors and went into policy review.

For now, it has recently pulled out the foreign capital shareholder transfer tax credit card, and it turned out to be a full review, and the real estate regulation pointed out that the repeat of the short - term prescription only raised uncertainty of the market. The current government`s representative promise, the minimum wage increase, and the job stability money card, which is put out to overcome this, are receiving the external side of SMEs and small merchants, and the criticism of "desk administration"

Economists speculate that the current government is pursuing various economic democratization policies in the early part of the regime, trying to win the market by artificial intervention and eventually following the failure of the past with "white flag."

A major example is the strengthening of the income tax levied on foreign large shareholders. The government announced the amendment of the tax law in August last year and said that non-resident and foreign corporations will adjust the shareholding rate, which is subject to transfer tax, from 25% to 5% or more when selling listed shares. However, the current securities trading system has limitations in grasping the gain of transfer, which is the basis for taxation of the foreign major shareholder subject to taxation, and faces the possibility that foreign investors are likely to trigger so-called "Korea". As the market rebounded, the government delayed enforcement in the second half of the year, and eventually on October 6, the Cabinet reserved the enforcement of the policy to reinvestigate the transfer tax. Yang Jung-mo, a professor of economics at Yonsei University, stated, "The government is trying to do everything with excessive intervention, so the market is in a bad situation." The government should have a minimal approach to the market in terms of financial consumer protection. "

Meanwhile, since the launch of the new government, the real estate policy has been undergoing "aggravation". The government issued a prescription for catching real estate seven times, including measures for 8 ? 2 and 10 ? 24 household debts from 6 ? 19 last year. Nevertheless, apartment prices have continued to rise in recent years, centered on reconstruction apartment complexes. According to KB Kookmin Bank, the price of Longevity Apartment in Seoul apartment exceeded 700 million won for the first time in history.

The problem is that the Korean government is repeating the past way of approaching financial regulation by confining the epicenter of rising house prices to Seoul Gangnam area. Professor Kwon Daejung, a professor at Myongji University, said, "It is the policy failure that insisted on demand and price control measures." He said, "We must stabilize the market with long-term demand and supply."

As a follow-up measure in response to the minimum wage increase, the government`s funding for job stabilization has not been well received. Although the government started to release KRW 3 trillion of job stabilization funds in January, the amount of application for the first month of implementation was only 0.002% of the total amount. The number of workers was only 8.6 million people, or 3.4 percent of the total number of 2,364,000 people (241,400 people were excluded from the allowance). In order to receive government subsidy, it is necessary to join four insurance policies. Four insurance costs per employee are 150,000 won, meaning that the government`s support of 130,000 won is meaningless. Mr. Choi, a professor at Konkuk University, pointed out, "The gap between the government`s principles and reality is the reason for the controversy." It is necessary to flexibly increase the insurance premium support given the fact that the four major insurance companies do not have many jobs.

Economists point out that although the new government has been actively pursuing various economic democratization policies, it is hard to make a positive impact on the market trend. Experts advise that financing should be managed with minimal intervention by the government, and real estate should go to long-term housing welfare improvement in light of regional characteristics.

Sejong city = By Kwon Dae Gyung • Hwang Byung Seo kwon213@

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