The Democratic Party of Korea and the Ministry of Planning and Budget will hold a closed party-government consultation on the 14th to discuss establishing the Future Response Fund Act, according to reports on the 12th.
The government is pushing to create a new "Future Response Fund" that would set aside part of the increased tax revenue from the semiconductor boom and other factors, separating it from the general account and accumulating it as a mid- to long-term investment resource. With the confirmation of next year's budget proposal and the medium-term fiscal management plan approaching, the upcoming consultation is expected to discuss the fund's basic structure and the government's legislative direction.
Earlier, Democratic Party policy chief Han Jeong-ae said on the 13th of last month, right after the party-government consultation on the second-half economic growth strategy, regarding the Future Response Fund, "If the discussions make progress, after going through party-government consultations, the government plans to submit its proposal to the National Assembly," adding, "The prospect has become visible that additional tax revenue beyond the original plan could be secured from this year through 2030."
What has been disclosed so far is limited to the fund's purpose, investment areas, and other broad directions. The first issue is how to define the "additional tax revenue" that will finance the fund. What the government calls additional tax revenue is different from the conventional "excess tax revenue," which means taxes actually collected exceeding the revenue budget for the year. A government official explained it as "the portion of tax revenue expected to increase structurally beyond the long-term revenue trend," but there is no clear standard for what the long-term trend of tax revenue is and how far it must be exceeded to be called additional tax revenue.
Its relationship with the current National Finance Act is also key. Conventional excess tax revenue is used for a supplementary budget or, after the settlement of account, treated as a consolidated surplus, going through legal procedures such as settling the grant-in-aid (non-earmarked tax) to local governments and repaying public funds and government debt. In contrast, the government seeks to place revenue projections that exceed the trend into a separate fund at the budget-drafting stage. In doing so, it must clarify the impact on the existing fiscal allocation system and the National Assembly's budget deliberation authority.
Ministries' demands over where to use the fund are also subject to coordination. The government has proposed a principle of focusing spending on four areas: youth, growth engines, regions, and talent. However, the Ministry of Education is asking to create a separate "education account" within the fund, while the Ministry of Economy and Finance is calling for linking the fund with the strategy-type sovereign wealth funds to be launched next year.
Criteria must also be set for drawing on the fund when there is a tax revenue shortfall. Minister Park Hong-geun of the Ministry of Planning and Budget said, "If a tax revenue shortfall occurs or a supplementary budget is urgently needed, we can use surplus resources from the Future Response Fund."