April 25, 2024

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Finance Minister Hong Nam-ki (Yonhap)

SEJONG -- The Finance Ministry has unveiled its plan to support microbusiness owners, including the self-employed, in the use of a tax revenue surplus and the national budget.

This is regarded as a sort of bailout for small businesses, which were severely hit by the pandemic in terms of sales and financial conditions. While they will have the opportunity to take out state-led loans at low rates, the government’s support package does not include cash grants.

“The support scale would reach 10.8 trillion won ($9.1 billion),” Deputy Prime Minister and Finance Minister Hong Nam-ki said on Nov. 24.

While the surplus in tax revenue came to 19 trillion won this year, 7.6 trillion won -- 40 percent of the sum -- will initially be allocated to local governments nationwide under relevant laws.

Hong said that “of the remaining 11.4 trillion, 5.3 trillion won will be used for small-business owners.” He added that the other 6.1 trillion won would be allocated for the payment of sovereign debt or other purposes.

As for the bailout for microbusinesses, Hong clarified that the ministry will mobilize additional funds totaling 5.5 trillion won from the existing national budget, alongside the planned 5.3 trillion won from the tax revenue surplus. This will make up a support package of 10.8 trillion won.

One of the detailed plans is to issue state loans at an annual rate of 1 percent with a ceiling of 20 million won per business. Others are slashing interest rates on outstanding loans, issued to the tourism and lodging industries, by up to 1 percentage point, and offering a grace period of 12 months for principal redemption for the two hard-hit sectors.

Meanwhile, the Finance Ministry also announced a plan to reinvigorate private consumption by extending the period of offering “lowered” specific consumption tax on passenger cars by six more months. Instead of expiring in December 2021, the reduction is to continue until June 2022.

When consumers purchase passenger cars, they have to pay specific consumption, education and value added taxes. The consumption tax has been cut temporarily -- from the original 5 percent of the automobile wholesale price to 3.5 percent.

Some 1.3 trillion won of the state budget will be allocated to the employment segment, amid mounting worries that payouts for the jobless might be depleted in the coming years or months. An unprecedented surge has been seen in the number of people who have lost their jobs and applied for unemployment benefits since early 2020, amid the ongoing pandemic.

By Kim Yon-se (kys@heraldcorp.com)