The Park Geun-hye government is increasingly getting caught in the crossfire between politicians and taxpayers over its broken promise not to raise taxes even in the face of growing welfare costs.

The ruling Saenuri Party leaders are urging the administration to face the reality that tax hikes are inevitable to maintain and provide welfare services, and that fiscal policies are constrained by the negative side effects of indirect tax increases.

They also urged the government to properly communicate with the public, instead of “lying” with inaccurate policies, warning against “populist welfare policies.”

“It is impossible to finance welfare without tax hikes, and it is inappropriate for politicians to deceive the people,” said Saenuri Party chairman Rep. Kim Moo-sung in a speech to mark the beginning of this month’s extra parliamentary session at the National Assembly.

“We face a situation where we have to reduce spending to improve finances amid a tax revenue shortfall. So, we need to reexamine the country’s welfare budget and eliminate inefficiency through restructuring.”

The party leader said people should know that they have to pay taxes in order to gain welfare benefits, adding that Saenuri Party lawmakers should devise appropriate policies aimed at making the people’s lives better even at the cost of losing votes.
 

Kim’s remarks came amid increasing public criticism lately over the government’s tax policy especially toward the average salaried workers.

In general, the mid-to-high income brackets will face higher income taxes following the changes made to tax exemptions and deductions under the government’s policy of “collect less and refund less taxes.”

However, this has drawn an angry backlash, although the government pledged to readjust its tax policy as soon as the people file and settle last year’s taxes. 

More recently, the government raised cigarette prices, and also pushed to raise regional, residential and automotive taxes, aimed at increasing revenue, despite President Park’s pledge not to raise taxes during her election campaign in 2012.

She said when she took office that there would not be any tax hikes as long as she was the president, and refused even to raise corporate taxes as it could hamper corporate activities.

Park instead promised to finance the welfare programs by normalizing the underground economy and tightening levies on the self-employed, which mostly make transactions in cash to avoid paying full taxes. The administration also pledged that it would target the rich tax dodgers as part of efforts to finance its welfare costs.

Saenuri Party’s new floor leader Rep. Yoo Seong-min has called on the government to consider raising corporate taxes.

“We must reconsider the government’s position of providing welfare without taxes,” Yoo said after the economist-turned-lawmaker won the primary vote on Tuesday.

“We must examine the corporate and income tax systems from square one.”

By Park Hyong-ki (hkp@heraldcorp.com)