EDITORIAL from the JoongAng Daily on Oct. 22)

Leave VAT alone

It is good news that both the ruling and opposition parties have agreed to
approve the government???s guarantee on banks??? foreign loans.
At this point it is difficult to stabilize the current confusion in the foreign
exchange market without an emergency package.
When the U.S. House of Representatives first rejected the $700 billion bailout
package in Washington, it had a major negative impact. Suffering grew while more
money and time were wasted due to political infighting.
International credit evaluation institutions are moving to raise the credit
ratings of local banks. It is good that the political parties in return requested
the government to provide stringent measures to prevent moral hazard.
It is also the right direction for supporting small- and medium-sized companies
that are in difficult situations.
The problem is that several conditions were traded in the process of reaching
agreement among the political parties.
The Grand National Party???s policy committee chairman said the party has agreed
to discuss the lowering of value-added tax as demanded by the Democratic Party
along the lines of other tax cuts. Instead of demanding the replacement of the
Kang Man-soo economic team, the opposition party asked that value-added tax be
lowered 30 percent.
The value-added tax is a sensitive issue that should not be changed without a
great deal of consideration.
The tax could be lowered easily if the political parties agree, but it would be
impossible to raise it back.
Many administrations have collapsed after changing the value-added tax without
the right preparation.
Additionally, if the value-added tax is lowered 30 percent, we lose 12 trillion
won ($9.10 billion) in tax revenue. To fill the void the government would have to
issue a large amount of government bonds every year.
It is appropriate to either change the economic team or lower other taxes in
accordance with the economic situation.
It is possible that the global economic crisis will be prolonged. It is a crisis
where the government, and possibly on frequent occasions, when both the ruling
and opposition parties have to move together quickly.
At a time like this, the opposition party must avoid the temptation to push its
own political interests using the economic crisis.
The ruling party that is responsible for the nation???s fate should act responsibly.

(END)