Gov't to cut taxes, ax red tape to bolster growth in 2009

SEOUL, Dec. 18 (Yonhap) -- The South Korean government said Thursday that it will take steps to cut taxes and slash administrative red tape to fuel consumption and business activities in the new year to help deal with a worldwide economic slump.

The Ministry of Strategy and Finance said in a policy report made to President
Lee Myung-bak that concerted effort will be made to help create new jobs, fuel
business investment and strengthen assistance to underprivileged people who may
be hard hit by slowdown in growth.
Seoul said earlier in the week that the economy will be hard pressed to reach 3
percent growth in 2009 from 5 percent in 2007, with about 100,000 new jobs being
created down from 200,000-300,000 target set at the start of the new
administration.
It also said that while the current account will move firmly in the black,
exports may fall off compared to this year.
The ministry said to fuel consumption and help the auto industry it will cut
excise tax on autos by 30 percent up till June.
Automobile sales have posted minus growth since August and nosedived 27.7 percent
in last month, with predictions for next year showing little signed of
improvement.
Most South Korean automakers including Hyundai, Kia and GM Daewoo have either cut
production or temporarily halted work altogether to deal with rising inventory.
It also said that companies will not be required to mandatorily hold onto
receipts for entertainment-related expenses as of next month, with the government
taking steps to sell off unnecessary state owned property that can create funds
to assist small- and medium- sized enterprises (SMEs) and underprivileged people.
The selling of state property could generate 3-4 trillion won while doing away
with the receipt clause could help business spending.
The clause introduced in 2004 makes it mandatory for companies to keep records of
all entertainment expenses exceeding 500,000 won, including names of people in
such gatherings.
The ministry in charge of the country's economic policy said that size of loans
that can be made available to SMEs and exporters will reach 25 trillion won in
the new year or an increase of 4 trillion won from 2008.
It added that current practice of deducting new investments from corporate or
income tax will be extended for one year as an inducement to get companies to
build up their size, with the aim of creating more jobs.
To come up with the money to help businesses, Seoul plans to enhance efficiency
in the public sector to allow 17.5 trillion won to be saved from the budget.
The government announced earlier in the year that there will be a large scale
restructuring of state-run companies and organizations with a 10 percent
reduction in workforce.
As of 2007 South Korea has 298 public institutes and companies with a total of
259,000 employees.
Besides these areas the finance ministry said every effort will be made to front
load next year's spending in the first half, allocate more funds to stabilize the
financial market and ease the liquidity crunch and take steps to remove
uncertainties in the foreign exchange market.
The government has already invested 1.65 trillion won into state-run lenders so
more money can be loaned to SMEs, and said a further 3.47 trillion won will be
injected into banks, credit insurers and a asset management corporation in
January.
In addition, Seoul will take steps to increase international cooperation to guard
against sudden developments that can threaten economic stability, fuel external
trade by pushing for free trade pacts and help local companies enter foreign
markets.
yonngong@yna.co.kr
(END)

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