Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol said Wednesday that the 2026 tax reform plan, set to be announced next week, is being drawn up with three goals in mind: boosting economic vitality, ensuring tax equity and building a sustainable fiscal foundation.

Koo made the remarks during a briefing to the National Assembly's Finance and Economy Planning Committee, saying the government "gravely recognizes" public concern over widening polarization across income groups and industries, even as the economy continues its recovery. "Growing external uncertainty and deepening disparities between classes and industries are concerns we take very seriously," he said.

Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol delivers a policy briefing at a plenary session of the National Assembly's Finance and Economy Planning Committee on Wednesday. [Yonhap]
Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol delivers a policy briefing at a plenary session of the National Assembly's Finance and Economy Planning Committee on Wednesday. [Yonhap]

Koo said the Ministry of Economy and Finance would concentrate its policy efforts on five priorities — stabilizing the livelihood economy, raising the potential growth rate, addressing polarization, elevating South Korea's global economic standing and reforming the public sector — in pursuit of what he called the "3-4-5 economic targets": a 3 percent potential growth rate, a top-four ranking in exports and a per capita income of $50,000.

He identified restoring the livelihood economy in ways that citizens can feel as the most urgent task. "We will keep inflation stably below 3 percent in the second half of the year, seek responses tailored to changing employment conditions driven by industrial transition, and coordinate locally led growth to spread the gains of expansion to every corner of the country," Koo said.

"We will also steadily build new growth engines for our economy," he said, pledging full support for three major mega projects as part of efforts to achieve the 3 percent potential growth rate target.

He added that the government would help young people develop AI capabilities and find jobs or start businesses, promote investment and technology development among small and medium-sized enterprises and small business owners, and simultaneously work to boost work incentives and stabilize incomes for low-income households.

Koo also said the government would push ahead with the full-scale internationalization of the won, strengthen communication with the international community to secure South Korea's inclusion in the MSCI Developed Markets index and establish a global AI hub, modernize treasury management centered on AI and blockchain, and pursue sweeping reforms of public institutions to enhance efficiency and accountability through strategic restructuring and stronger safety management.

To keep second-half inflation below 3 percent, the ministry plans to ease the cost-of-living burden on energy and food, tighten sanctions against hoarding and speculation, and root out market-distorting behavior. It will also strengthen foreign exchange risk management in response to the round-the-clock opening of the currency market, manage housing supply and demand, and bolster supply chain resilience for economic security items.

The three mega projects will be advanced at pace, and large-scale policy financing will be channeled into key national strategic industries such as AI and semiconductors. The government will pursue youth-tailored policies — including supporting 200,000 young people in developing AI skills and creating 300,000 jobs and startup opportunities — while actively backing capacity-building for small and medium-sized enterprises and small business owners and stabilizing incomes for low-income groups.

In taxation and fiscal policy, the ministry will review all tax expenditures from scratch and restructure the real estate tax regime and the family business inheritance deduction system to better reflect public expectations. It will also modernize treasury management using AI and blockchain, shift the management of state-owned assets toward value creation, and broaden the demand base for government bonds.

Alongside these efforts, the government plans to pursue public sector reform — including strategic restructuring of public institutions, wider adoption of AI and stronger safety management — and to revamp procurement rules to make them more conducive to acquiring innovative technologies, reinforcing the public sector's role as a first buyer of such technologies.

To drive locally led growth, the government will identify and select growth engines across five major hubs and three special zones, providing comprehensive support through a seven-part package covering fiscal, financial and tax measures. It also plans to complete nine national normalization tasks in the economic sphere within the year, including eliminating hoarding and preventing abuse of tariff quota systems.


y2k@heraldcorp.com