In reviewing the action plan of the new South Korean president to enhance his position in office and create some space for a new team, we should not fail to also look at the policy of the new government focusing on the measures implemented by Park Geun-hye that were “unpopular” and ended up provoking mass disgruntlement.
We shall begin at the attempts to tax protestant sects, many of which have long turned into commercial enterprises where ordinary adherents work like beavers for the welfare of the leaders, only receiving 10% of normal wages. A prime example of where all this may end up can be the tragedy involving the sinking of “MV Sewol”, where both the leadership strategy and the behavior of the team consisting of some cult followers ultimately led to the death of more than three hundred children.
In December 2015, South Korean Ministry of Planning and Finance approved twelve amendments to the taxation laws previously adopted by the National Assembly. A number of them provided for taxing churchmen with taxable incomes at rates between 6 and 38 per cent, depending on the amount of their income.
The clergy taxing issue was addressed for the first time back in 1968. Thereafter, the issue was often raised in the National Assembly, but was each time dismissed to avoid generating dissatisfaction among the believers, who constitute a significant part of the voters. South Korea remains the only OECD member where the incomes of the clergy are not taxed.
Among the believers, the law has been causing some disagreement. As the Communion of Churches in Korea (CCIK) has stated, the tax will cause a social conflict with multiple negative consequences due to some drawbacks in the law. On the other hand, the National Council of Churches in Korea (NCCK) believes that the priests must serve not only the Lord, but also the country, including by paying taxes.
In the opinion of the author, this attempt to force the “church oligarchs” to pay taxes (and to prosecute some odious pastors) played a considerable role in the events that followed: the congregates take to the streets for no charge at all, and the sects that the ex-president wanted to nail down are now well beyond a million followers in total.
The Government had planned to start collecting the taxes from 2018. However, 25 members of the National Assembly (from both the ruling and the opposition parties) initiated amendments to the law to postpone the introduction of the tax on the clergy for at least two more years. These deputies are calling for additional discussions between the tax authorities and religious circles. The new government is taking extra precaution in dealing with this issue: in particular, the Minister of Planning and Finance Kim Dong-young supports the idea of further discussions, although even the South Korean media has openly stated that “the clergy tax could help increase fiscal performance.”
Here, we take a look at Kim Young-ran’s anti-corruption law, especially that it turned one year old on September 27. We recall that the bill was initiated as early as August 16, 2012 before the Conservatives came to power. Lee Myung-bak shelved it until 2015, when the bill was approved by the National Assembly, although it had taken long to put it into effect due to the disputes over its compliance with the Constitution. The Constitutional Court of South Korea officially recognized the law on July 28, 2016, and it came into force two months later.
The law is mainly intended to strictly determine the threshold amount that is deemed a bribe. This amount also includes the cost of treats and gifts that a civil servant might receive and be held liable as a result. A civil servant who receives treats with the cost exceeding KRW 30 thousand or USD 26, or a gift with the cost exceeding KRW 50 thousand or USD 43, or money for family events exceeding KRW 100 thousand or USD 87, is subject to a fine. Where a civil servant receives from third parties over KRW 1 million or USD 877 as a lump sum, or where the total amount of such proceedings exceeds KRW 3 million or USD 2,600 a year, they may be sentenced for up to three years in prison. High royalties for lectures are also classified as bribes.
In theory, this is a crushing blow to routine corruption. However, the flower and restaurant businesses came up with complaints almost immediately. The Korean Federation of Restaurateurs surveyed 420 businesses from September 11 to 16 and revealed 66.2% of respondents reporting a drop in sales within one year after the law took effect. The average decrease amounted to 22.2%, and the general market indicator shrank by 14.7%. To cover their losses, most restaurants and cafés had to reduce their staff, change prices, and take other similar measures, while lobbying for an amendment to increase the legal cost of treats to at least USD 60.
CEO Score, a company that assesses the achievements of the management of five hundred major South Korean companies, also reports that the anti-corruption law has led to South Korean firms dramatically cutting their expenses on treats for their partners and guests. The report is based on a review of 139 of the five hundred companies that disclosed their expenses on treats to their guests, such expenses amounting to USD 85 million for the first half of this year. This is 15.1% less than for the same period of the previous year, when Kim Young-ran’s law was not yet in force. As it turned out, 102 of 139 major South Korean companies reduced the expenses, while 37 increased them. The biggest savings on treating guests were made in the pharma sector: 51.2%, followed by ship building, engineering, services, trade, as well as automotive and automotive-components manufacture.
We shall note, however, that the prices for the treats charged back in 2012 are now two low for today, which puts any gala dinner more or less under suspicion. On the other hand, too high a threshold nips in the bud the essence of the law intended to somehow change the social patterns based on the gift culture and related moral obligations.
Finally, let us remember Park Geun-hye’s January 2016 government orders to fire inefficient officers and change employment conditions. This labor policy caused mass street protests event before the scandal with Choi Soon-sil.
On the one hand, the authorities wanted to do something with the “life time employment system” where an employee who has long served a corporation may only be fired for an extraordinary offence. An ordinary underperformer may only be shifted, but not kicked out. This hits both the bureaucrats with extra duty and the Korean youth with high unemployment rates ( ). On the other hand, the new regulation provided grounds for the firing of underperforming employees, and allowed employers to adopt unfavorable corporate conditions on the consent of most of the personnel. Trade unions raised strong objections, arguing that the performance criteria are too ambiguous, in which case the new system could now be used as a pretext for firing the disfavored rather than the odd ones.
Apart from the street protests and failure in the collaboration between the authorities, trade unions, and employers, the documents gave rise to numerous lawsuits, as over three hundred state and regional companies paid performance bonuses without the trade union’s approval.
In general, deregulation had long been a matter of time. Moon Jae-in promised to do so even before he was elected president. Finally, on September 25, 2017, the Ministry of Labour and Employment of the Republic of Korea made the necessary decision. Trade unions approved it, noting, however, that they were not yet ready for the negotiations between the Ministry of Labour and the trade unions and employers.
The author is ambiguous in assessing this policy of the new government, as it is still unclear whether its desire to mitigate the extremes supersedes the logic of the factional struggle according to which any decisions, however absolutely correct they might be, by the previous president should be nullified and replaced by something else. The problems still remain, and await their resolution.
Konstantin Asmolov, Ph.D. (History), leading researcher at the Center for Korean Studies of the Institute of Far Eastern Studies of the Russian Academy of Sciences, exclusively for the online magazine “New Eastern Outlook”.
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