2023 budget finally passed after corporate tax compromise

The legislators of the two largest parties – People Power Party (PPP) and the Democratic Party (DP) – on Saturday approved on a 638.7 trillion won ($490 billion) budget, which is 300 billion won less than the one proposed by the government.

Yoon Suk-yeol government cabinet members including Prime Minister Han Duk-soo as well as Finance Minister Choo Kyung-ho at the National Assembly to watch the 2023 budget approval on Saturday. [YONHAP]

The budget for 2023 has finally been passed, more than 20 days after its legal deadline, on Christmas Eve.

The legislators of the two largest parties — People Power Party (PPP) and the Democratic Party (DP) — on Saturday approved a 638.7 trillion won ($490 billion) budget, which is 300 billion won less than the one proposed by the government.

As agreed on Thursday between the two parties, 4.6 trillion won worth, including spending earmarked for President Yoon Suk-yeol's newly created departments within the Ministry of Interior and Safety and the Ministry of Justice, was cut.

An additional 3.9 trillion won was added.

This included 1.7 trillion won that will be used to support the vulnerable such as the elderly, people with disabilities and small business owners facing difficulties from rising inflation and high interest rates.

Some 700 billion won was added for safety related issues, especially related to the Itaewon crush on Oct. 29 from which 158 people died.

Another 1.5 trillion won is to go toward revitalizing the local economy including financing areas that could be damaged by typhoons.

Among the 273 lawmakers that voted, 251 approved.

Several key tax reforms have been approved. Most important was the 1-percentage-point corporate tax cut. The PPP and the government had demanded the maximum tax rate be lowered to 22 percent from 25 percent.

The tax cut compromise was reached on Thursday, making the vote possible.

Lower real estate taxes were also approved; changing the assessed value threshold for the comprehensive real estate holding tax, changing some of the parameters for applying the tax and changing the tax rate.

A new capital gains tax that was supposed to go into effect next year will be delayed for two years. When enacted, gains on stocks, bonds and derivatives of over 50 million won will be taxed, while a trading tax will be lowered from 0.23 percent this year to 0.15 percent by 2025.

These were the key reforms that both parties agreed to on Thursday after more than 20 days of bickering.

The president's office expressed disappointment over the budget.

"The budget for the people's livelihoods has been dulled," deputy presidential spokesperson Lee Jae-myoung said Friday. "More could have been done, but we had no other choice but to reach an agreement in regards to the Yoon Suk-yeol government's budget."

The deputy spokesman said the goal of the budget is to create jobs and revitalize the economy.

The two major parties battled over the budget for a police bureau that was newly created by the Yoon government at the Ministry of Interior and Safety and a public office candidate screening department under the Ministry of Justice. They were also at loggerheads over DP chief Lee Jae-myung's push for the funding of local gift coupons.

In the compromise, the budget for the departments was cut in half, and 352.5 billion won will be allocated to the gift coupons.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]