Repeated discords among policymakers have amplified concerns over the direction of the Moon Jae-in administration’s economic policies that are criticized for being detached from the reality.

Adding to the confusion is half-baked proposals from a number of policy advisory panels swayed by progressive civic group members and scholars.

Finance Minister Kim Dong-yeon, who doubles as deputy prime minister for economic affairs, last week rebuffed an earlier proposal made by a presidential panel that the threshold for comprehensive financial income taxation be lowered to 10 million won ($8,980) from the current 20 million won.

He said the government would have to further review whether to strengthen taxation on financial income as the measure could cause funds to be funneled into the property market and bring about other far-reaching negative effects.

Under the country’s taxation system, an annual financial income exceeding 20 million won is added to other personal incomes to be subject to a higher tax rate. Finance Ministry officials say the proposed lowering of the threshold for comprehensive financial income taxation would prompt protests from a wide swath of taxpayers, while making little contribution to increasing revenue.

A presidential spokesman came forward to subdue the discord, saying Kim’s stance had been coordinated with the presidential office.

In May, the public saw Kim openly disagree with the view by the chief of presidential staff for policy, Jang Ha-sung, that there were no job cuts attributed to this year’s minimum wage increase. At the time, the minister said it was more reasonable to see the steep minimum wage hike had a negative effect on employment, particularly for temporary and low-paid workers.

The presidential office has said Moon’s recent reshuffle of his senior aides on economic affairs and job creation should not be viewed as a departure from his income-led growth drive propelled by minimum wage increases but as a move meant to achieve its results more quickly. 

Last month, Kim joined Rep. Hong Young-pyo, the floor leader of the ruling Democratic Party of Korea, in calling for expanding the flexible working-hours system to cushion the impact from a shorter workweek that was put into practice on July 1. But Employment and Labor Minister Kim Young-joo turned a deaf ear to the request.

The repeated cacophony over key policies has deepened confusion in the business community and eroded public trust in government policies.

Moon’s aides have described it as a phenomenon that stems from letting each ministry decide on policies autonomously without being influenced by the presidential office. But critics rebuff such explanation as misled.

“It’s nothing but a reflection of the lack of communication and coordination within the administration,” said Yang Joon-mo, a professor of economics at Yonsei University.

The confusion over policies has been further complicated by a number of advisory committees set up by the Moon administration to take the lead in discussing key policy agenda.

Criticism has been growing that those committees comprised of members who lack practical experience and are biased toward progressive ideas have held discussions behind closed doors.

The presidential panel on financial reform, whose proposal for strengthening taxation on capital gains was rejected by the finance minister, has not made public the results of its meetings and held no public hearings on the issue since it was launched in April. More than two-thirds of its 14 members are professors who have no experience of handling tax administration.

“Committees have undermined the stability of state affairs by pouring out half-baked suggestions that lack practicality,” said Park Chun-oh, a professor of public administration at Myongji University.

A ruling party official said the committees established after Moon took office in May last year had been expected to moderate some radical pledges made during his campaign but have been moving in the opposition direction.

Experts call for restructuring committees under the presidential office and other administration agencies, which numbered 555 as of the end of June. They say measures should be taken to abolish unnecessary panels and enhance the expertise and political neutrality of others.

Repeated policy confusions have increased the need for a firm control tower.

Finance Minister Kim seems to have become more active in carrying out his role as chief economic policymaker after confronting the presidential staff over the effect of the minimum wage hike.

He has stepped up efforts to facilitate innovation-driven growth, which forms key pillars of the Moon administration’s economic strategy along with income-led growth and promoting a fair economy.

Seemingly, Moon has thrown his weight behind Kim, asking him to play the central role in pushing ahead with innovative growth. But the president remains short of stepping forward to help persuade politicians and interest groups to drop their objections to regulatory reforms that are essential to carrying forward innovation-fueled growth.

Speculation persists that pressure may be building to replace Kim with a figure to be more in tune with the fundamental policy direction of the Moon government.

Critics note the cause of repeated policy discords is rooted in its pursuit of incompatible policies that seek to boost corporate activity while pushing through anti-business measures.

By Kim Kyung-ho 
(khkim@heraldcorp.com)