A new fund will be established to channel tax revenues that have surged amid the semiconductor boom into seed money for future growth.

The initiative aims to intensively invest increased tax revenues in areas that can strengthen long-term national competitiveness and boost potential growth rates.

The approach prioritizes generating greater economic impact over exhausting funds on economic stimulus, consumption-oriented spending, or debt reduction.

The local education finance grant (education grant), which has automatically allocated about one-fifth of internal taxes, will be overhauled for the first time in 55 years to reflect the declining school-age population.

Instead, the plan aims to promote a balanced improvement of the education system by strengthening investments in early childhood, higher, and lifelong education.

The Ministry of Planning and Budget announced that Minister of Planning and Budget Park Hong-keun agreed to pursue these plans during a fiscal operation strategy meeting he presided over at the Government Complex-Seoul earlier today (the 21st), with Minister of Education Choi Kyo-jin in attendance.

The government is creating the Future Response Fund to separately set aside and utilize "additional tax revenues" generated by the semiconductor boom.

Minister of Planning Park explained, "We need to prepare a fiscal 'storage vault' to save when there is a surplus and use when there is a shortage. We plan to establish the Future Response Fund by accumulating rapidly growing tax revenues, and use it as a strategic investment platform to support a rebound in the potential growth rate and a fiscal stabilization device to mitigate tax revenue volatility."

The fund will heavily invest in youth, growth engines, regional areas, and education and talent sectors to pursue a rebound in the potential growth rate and respond to unexpected policy demands arising in the middle of the fiscal year.

It will comprehensively support the younger generation, who face major difficulties in employment, housing, marriage, childbirth, and childcare.

The fund will make bold investments in seven SEED programs, including artificial intelligence (AI), three mega-projects, small modular reactors (SMRs), nuclear fusion, and advanced biotechnology, to serve as growth engines.

It will provide multi-faceted support to improve regional residential environments, promote balanced growth, foster top talent to enhance competitiveness in advanced sectors, and attract overseas talent.

The Future Response Fund will be built centered on additional tax revenues.

Additional tax revenue refers to financial resources exceeding the internal tax "trend value" when the internal tax revenue budget of the following year's budget proposal exceeds that trend value.

When determining the trend, the average annual growth rate of internal tax settlement amounts over the past 10 years is used as the benchmark.

Internal taxes exceeding the trend value are regarded as additional tax revenues and transferred from the general account to the Future Response Fund.

Conversely, if internal taxes fall short of the trend value, funds from the Future Response Fund are transferred to the general account.

The plan is to utilize the Future Response Fund as a safety valve to reduce fiscal volatility in this manner.

Excess tax revenues, remaining resources from the national surplus, and operating profits from surplus funds will also serve as income for the fund.

If the internal tax revenue budget changed through tax revenue re-estimation increases compared to the existing internal tax revenue budget, excess tax revenue corresponding to that increase, remaining resources from the national surplus, and investment profits obtained from promising assets such as bonds or stocks will also be utilized as financial resources for the Future Response Fund.

The specific scale of the fund will be unveiled early next month when the next year's budget proposal and the national fiscal management plan are announced, reflecting tax revenue forecasts calculated by the Ministry of Economy and Finance.

However, an approximate scale of the fund can be estimated.

Calculated based on the creation method and overview explained by the government, the trend value for 2027 is around 370 trillion won.

Last month, Minister Park Hong-keun mentioned that national tax revenue for 2027 would reach 500 trillion won plus alpha.

In recent years, the proportion of internal taxes out of national tax revenues has hovered around 88 to 89 percent. Assuming this trend continues, the scale of additional tax revenues is estimated to exceed 60 trillion to 70 trillion won.

If tax revenues increase further due to the semiconductor boom, the Future Response Fund is expected to surpass 100 trillion won.

If national tax revenues increase up to 600 trillion won, additional tax revenues could reach 160 trillion won.

The Future Response Fund would grow correspondingly.

With corporate taxes recently increasing, the ratio of internal taxes among national taxes is rising, and some projections suggest that if excess tax revenues to be announced around late September are added, the fund could approach 200 trillion won.

The Ministry of Planning and Budget will be in charge of overall fund management as the management entity, and related ministries will directly execute their respective fiscal projects utilizing the fund's resources.

Surplus funds will be operated through a dedicated management institution to generate profits.

Currently, 19.24 percent of internal taxes are allocated as local allocation taxes, but with the establishment of the Future Response Fund, the base used to calculate this will change.

Moving forward, the calculation will be based on 19.24 percent of the remainder after subtracting the accumulated amount of the Future Response Fund from internal taxes.

The base will be changed while the linkage structure is maintained.

The plan is to reinvest in local regions by utilizing the local account established within the Future Response Fund to create regional growth hubs and improve residential environments.

The education grant will be significantly overhauled to reflect changing times, such as economic growth and a declining school-age population.

Currently, 20.79 percent of internal taxes are allocated, but going forward, the amount will be calculated by reflecting the 3-year average economic growth rate and 35 percent of the 3-year average school-age population change rate.

The internal tax linkage structure of the education grant, which began in 1972, is coming to an end and will be renewed starting next year.

Consequently, tax revenues that surged due to the semiconductor boom will no longer be uniformly reflected in the education grant.

However, the total amount of education grants and the education grant per student will continue to increase.

The government plans to use the financial resources secured through the reform of the education grant as income for the education and talent account to be established within the Future Response Fund, primarily spending them on early childhood, higher, and lifelong education.

This effectively removes barriers so that the education grant, which was primarily used for kindergarten, elementary, middle, and special education, can be utilized across various educational fields.

It will also be used to supplement education grants when they decrease and to expand strategic investments related to education and talent, such as attracting top talent and preventing the outflow of national talent.

If the amount of the education grant decreases compared to the previous year, a provision will be specified in the Grant Act to guarantee that the total amount does not shrink by compensating for the difference.

Minister of Education Choi Kyo-jin stated, "While reflecting changed educational environments such as a declining school-age population and changes in economic and tax revenue conditions, we will maintain stable fiscal investment in elementary and secondary education and expand investments into early childhood education, higher education, and lifelong education to achieve educational development spanning all stages of life."

Superintendents of education and educational organizations strongly opposed the education grant reform plan.

The Emergency Action for Reform of Local Education Finance Grants, composed of 363 educational, civic, and social organizations nationwide (Emergency Action), held a press conference in front of the Government Complex-Seoul this morning and urged the scrapping of the reform plan.

The Emergency Action warned, "If you force the abolition of the 20.79 percent linkage system, we will launch a powerful joint action together with superintendents of education, teachers, parents, education workers, and educational civic societies nationwide."

The Korean National Council of Education Superintendents, an association of provincial and metropolitan superintendents of education nationwide, issued a joint statement urging, "To ensure future education and the stable operation of school sites, the current internal tax linkage rate of 20.79 percent must be maintained," while calling for the formation of an official consultative body in which the education field participates.

In response to concerns and backlash, Minister Park stated firmly, "As the minister in charge of finance, let me make it clear once again. There is no way that the educational budget for our children in kindergartens, elementary, middle, and high schools will ever be reduced."

The government will prepare a package bill containing these plans, go through legislative notice and a cabinet meeting, and submit it to the National Assembly along with next year's budget proposal on the 3rd of next month.

(Photo: Yonhap News)