Gov’t to exempt small merchants from paying back Covid-19 relief funds

[Photo by Han Joo-hyung]

The South Korean government has decided to exempt 570,000 small business owners from paying back about 800 billion won ($589.9 million) in Covid-19 emergency relief funds, easing struggles amid high inflation and slow economy.

“The (government’s) decision to nullify the plan of redeeming relief funds is good news for 570,000 small business owners and self-employed individuals that have been struggling with harsher business environment,” said an unnamed official from the Korea Federation of Micro Enterprise, a lobby group for SMEs, on Sunday.

The remarks were made after the government said it would amend the country’s Small Business Act to waive the claw-back obligation, taking into account the hardships faced by small businesses due to high interest rates.

Critics, however, noted that the government’s stance on whether to require the claw-back of relief funds has been inconsistent, leading to uncertainty among small businesses.

The Ministry of SMEs and Startups had previously announced to redeem excess payments for Covid-19 small business relief, which provided financial support of up to 2 million won to businesses that were significantly affected by the pandemic, regardless of their sales decline.

Recently, however, Minister Lee Young of the Ministry of SMEs and Startups has expressed an unclear stance on the announcement.

In August, Lee said that the obligation to take back disaster subsidies was mandated by the Subsidy Act. However, during a session of the National Assembly’s Budget and Finance Committee in September, she said, “We have no concrete plans in place.”

In October, Lee altered her stance again and said “We are committed to a complete claw-back of the relief funds.”

The Ministry of SMEs and Startups later clarified that it was simply reiterating the protocols it had laid out when initially providing the aid.

Critics, however, said that the government’s inconsistent stance on the claw-back seems to be due to concerns over the next year’s general election.

Concerns have mounted that the decision may send a wrong signal that government relief funds need not be reimbursed once received, irrespective of eligibility criteria.