The government will establish a "Future Response Fund" next year to pool semiconductor-driven excess tax revenue and invest it in future growth engines. The fund is estimated at a minimum of 100 trillion won. The government on the 21st announced a "plan to promote the Future Response Fund" centered on these measures.
◇ Create a 100 trillion won+α Future Response Fund using additional tax revenue and more
The government said it will treat revenue in next year's national tax revenue budget that exceeds the 10-year trend of the national tax settlement of account as "additional tax revenue" and use it as a source for the Future Response Fund. The trend figure for next year is estimated by reflecting the average annual growth rate over the past 10 years in the previous year's national tax settlement of account, and next year's revenue budget is expected to exceed this by more than 100 trillion won.
In addition, if "excess tax revenue" arises because actual revenue in a given year exceeds the revenue budget planned for the previous year, the government will deposit it into the Future Response Fund. Under Article 55, Paragraph 2 of the National Finance Act, revenue that exceeds the existing national tax revenue budget when the national tax revenue budget is re-estimated in September will be put into the Future Response Fund.
The remaining resources from the consolidated surplus after subtracting expenditures from revenue collected over the year will also be deposited into the fund. Under the National Finance Act, funds left after the settlement of grant-in-aid (non-earmarked tax), contributions to the Public Fund Repayment Fund, and repayment of Government Bonds will be used as resources for the Future Response Fund.
It also said that revenue from managing idle funds, earned through investments in bonds, stocks, and more, will be used as a source for the Future Response Fund.
◇ "To be used to raise the potential growth rate"… Invest in four key areas including youth
The government said it will use the Future Response Fund raised in this way to increase the potential growth rate. Korea's potential growth rate has been on a steady decline, and projections indicate it will be in the 0% range in the 2040s.
The four investment areas the government said it will back are ▲ youth ▲ growth engines (fostering advanced strategic industries) ▲ regions ▲ education and talent. Based on the fund established, it will support young people at each stage of growth and invest in future technologies in advanced strategic industries such as artificial intelligence (AI), small modular reactors (SMR), and space and aviation. The plan also calls for using the fund to improve living conditions in the regions and to support early childhood and higher education.
To this end, the government will set up five accounts within the fund— a general account, a youth account, a growth engine account, a regional account, and an education and talent account— and operate them so that relevant ministries can execute the fund for their respective fiscal projects. It will also form a public-private joint Fund Operations Deliberation Committee with experts and related ministries participating, and establish subcommittees for each of the four key investment areas to manage the fund.
The government will submit this to the Cabinet meeting on the 1st of next month and present the bills to the National Assembly as a package with the budget bill on the 3rd. The bills include the Act on the Establishment of the Future Response Fund and amendments to the National Finance Act, the Local Grant Act, and the Local Education Finance Grants Act.
The National Finance Act will add the "Future Response Fund Act" to the legal grounds for establishing funds and insert the wording "supplementary budget or deposit into the Future Response Fund" into the handling of consolidated surpluses under Article 90.
The Local Grant Act will change the resource base from "19.24% of the aggregates of national tax" to "19.24% of the aggregates of national tax excluding deposits into the Future Response Fund." The Local Education Finance Grants Act will likewise be amended to change the resource base from "20.79% of the aggregates of national tax" to "an amount equal to the previous year's grants multiplied by the three-year average nominal growth rate and 35% of the three-year average change rate in the school-age population."