Do not sideline ministers in decision-making
Deputy Prime Minister and Finance Minister Hong Nam-ki is at a loss because President Moon Jae-in turned down his offer to resign following a rift with the presidential office and the ruling Democratic Party of Korea (DPK) over key issues. Hong attempted to quit Tuesday, taking "responsibility" for his plans to lower the standard for levying capital gains tax on stock investors and impose heavier taxes on owners of multiple homes that were thwarted in the face of opposition from Cheong Wa Dae and the party.
Hong's finance ministry has been seeking to lower the minimum combined values of shares owned by individual investors subject to capital gains tax to 300 million won ($440,000) from the current 1 billion won, effective from next year. But the presidential office and the DPK decided to postpone the implementation of the new rule by two years, citing strong resistance from individual investors and growing economic uncertainty.
The move is inappropriate as the DPK has been pledging to revise the tax law to lower the amount of capital gains for each individual investor subject to taxation to the 300 million won level. The party explained that the introduction of the new tax bill would prompt a selling spree on the stock market, plunging it into chaos in the year-end season. It also cautioned of a possible adverse impact from the just-ended U.S. election.
Yet, the party faces growing criticism over reversing its decision not to field candidates for mayoral by-elections in Seoul and Busan slated for next April. Cheong Wa Dae, in particular, has come under criticism for monopolizing the decision-making process, while sidelining Cabinet ministers.
The recent case shows Hong has been suffering from a lack of leadership, despite his role as the control tower of the nation's economic and financial policies. Hong has repeatedly been forced to back down on his own decisions due to opposition from the presidential office and the DPK.
Hong had to give up his plan to offer the first batch of disaster relief funds to the bottom 70 percent in the income bracket in March, to help people cope with the fallout from the rapid spread of the COVID-19 pandemic. Instead, he had to accept the ruling party's decision to provide relief to all people regardless of their income. The party came under fire for its populist move to woo voters in the April general election.
Hong and the ministry are to blame partly for the recent bungling in major economic policies, given the need for them to more closely read the people's minds. But the presidential office and the DPK should take the bigger blame for having caused the discord with the minister. Hong and other Cabinet members have been reduced to a role of executing orders from Cheong Wa Dae and the DPK.
Major policies have so far been determined by Moon's aides and some key figures in the governing party. Against this backdrop, the politicizing of economic policies has become a main trend in the ruling camp. Political consideration is necessary sometimes if it helps reflect the people's sentiment and interest. But excessive politicizing runs the risk of resorting to populism.
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