Minister Park Hong-geun of the Ministry of Planning and Budget said on the 26th that he would overhaul the current system that automatically allocates 20.79% of the national tax as grant-in-aid (earmarked tax) for educational finance.
Minister Park appeared on KBS "Sunday Diagnosis" on the 26th and said, "As the size of the national tax has grown, we are now breaking the 20.79(%) linkage structure and drawing up a new plan," adding, "We are now consulting with the Ministry of Education, and once the government fine-tunes its position, we plan to submit this as a bill for National Assembly review soon."
Park said the current national tax linkage system "was introduced in the 1970s, when 1 million people were born in a single year," and noted that in the current situation, with annual births down to the 200,000 range, there are aspects that are not reasonable.
Under the grant-in-aid (earmarked tax) system, based on the Local Educational Finance Grant Act, a fixed share of the national tax aggregates is distributed to local education offices, and currently 20.79% of the national tax is automatically granted.
Park said, "We should strengthen the substance of both elementary and secondary education and kindergarten education," adding, "We will not cut investment. We will keep investing in line with the long-term trend." He added that without reducing the earmarked tax aggregates, which currently stand at about 13 million won per student annually, the savings would be put more into higher education, lifelong education and early childhood education.
Minister Park also reaffirmed the direction of basic pension reform that day. The plan is to restructure the current basic pension, paid to the bottom 70% of seniors aged 65 or older by income, into a "more for the bottom, less for the top" approach.
He said the basic pension "was introduced to reduce the elderly poverty rate, and of course it had some effect," but pointed out, "Because it is given up to the bottom 70%, we have now reached a situation where a single person with an income in the 4.6 million–4.7 million won range is receiving it. For two-person households, it is around 7 million–8 million won."
After mentioning the median income, Park said it is "what you get by lining up the entire national income and referring to the middle value," and added, "If we restructure anew based on that, we can provide thicker support to those in difficulty." He also said, "For such a design, we have already reached the final stage of consultations with the Health and Welfare Ministry."
This year's median income is 2,564,238 won for a one-person household, 4,199,292 won for a two-person household and 5,350,936 won for a three-person household.
On concerns that expansionary fiscal policy could prolong a high inflation trend, Minister Park said, "While pursuing proactive fiscal policy, we must ultimately approach it in a way that minimizes the impact on prices."
Regarding the future response fund to be established using tax revenue that grew far more than expected thanks to the semiconductor boom, he said it "should be used for productive expenditure that opens Korea's future growth plate," adding, "We are pushing, as a government bill, a future response fund that can strategically invest in youth, growth engines, regions and talent development."
He also added that the future response fund will serve as a fiscal stabilization device to respond to tax revenue volatility, "to be used to bolster fiscal capacity so we can make good use of this spare funding when there is a tax revenue shortfall or when an extra budget is urgently needed," in addition to investing in the future.