[Anchor]
The government has decided to create a Future Response Fund, channeling tax revenues increased by the semiconductor boom into future growth engines. In addition, the local education finance grants, which have automatically allocated 20 percent of domestic taxes, will be reformed for the first time in 55 years to reflect changes in the school-age population.
Reporter Chae Heesun has the details.
[Reporter]
The domestic tax-linked system for local education finance grants, introduced in 1972, will be abolished starting next year.
Critics have pointed out that because 20.79 percent of domestic taxes were automatically distributed as grants, educational funding continued to swell even as the student population declined, leading to numerous unnecessary projects.
Moving forward, the grants will be calculated by reflecting the average ordinary growth rate over the past three years and changes in the school-age population.
Under the new formula, next year's grant size—which would have reached 100 trillion won under the traditional method—is estimated at 78.9 trillion won, a 3.3 percent increase from this year.
The government plans to establish the Future Response Fund by utilizing the difference in grants secured through this system reform, along with additional tax revenues generated by the semiconductor boom.
The plan is to calculate the 10-year average of how quickly domestic taxes (excluding customs and local taxes) have grown, designate tax revenues exceeding this average as additional tax revenues, and invest them in four areas: youth, growth engines, regional development, and educational talent.
Discussions even suggest that the size of the fund could exceed 100 trillion won.
[Park Hong-keun / Minister of Planning and Budget : We intend to utilize it as a strategic investment platform that supports the rebound of potential growth rates and as a fiscal stabilization device to mitigate revenue volatility.]
While the government explains that the fund is necessary for swift and long-term investments, concerns also persist that it could be used like a slush fund for the administration.
This is because if domestic tax revenue falls short of the trend, the fund can be pulled back into the government's general accounts, and the fund's operational plans can be altered by up to 20 percent of major expenditure items without parliamentary approval.
[Kim Woo-chul / Professor of Tax Department, University of Seoul : Even if it undergoes deliberation by the National Assembly as a fund project, considerable discretion is granted within the 20 percent range, which invites criticism that the government is trying to gain more freedom from parliamentary review.]
Controversy is also arising over whether the increased tax revenues should be used to repay national debt first.
Key issues in the upcoming legislative process are expected to be how specifically to define the fund's uses and operational principles, and how to manage the backlash from the education sector over the reduction of education grants.
(Camera: Lee Jae-young | Video Editing: Kim Jong-mi | Design: Kang Yoon-jung, Jeon Yu-geun)
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