SEOUL, Jan. 15 (Yonhap) -- The transition team of President-elect Park Geun-hye is scrambling for ways to fund a string of welfare and other expensive projects promised during her campaigning amid concern they could cost much more than originally estimated.
At least 134.5 trillion won (US$127.5 billion) is necessary over the next five years to implement 252 campaign promise projects, including providing all senior citizens aged 65 or older with a monthly allowance of 200,000 won regardless of their income levels.
The amount is nearly 40 percent of South Korea's 342 trillion won annual budget for 2013.
What makes the situation worse is that Park wants to raise the necessary money without directly raising tax rates in accordance with her campaign promise. Experts have also warned that the original estimate is incorrect and the actual amount would be much higher.
Officials of the transition committee and the government have been racking their brains to make as many financial resources available as possible for the projects, from cutting back on non-core spending and reducing tax benefits to cracking down on tax evasions.
Civic activists gathering in front of the presidential transition committee building in central Seoul on Jan. 14, 2013. (Yonhap file photo)
Fund-raising has also been a key element of government policy briefing to the committee.
But concerns have grown so strong over whether it would be possible to raise the necessary funds that some members of the ruling Saenuri Party began calling for revising big-ticket campaign promises, such as the allowance for senior citizens.
"Is it right to provide even Samsung Chairman Lee Kun-hee with the senior pension?" Rep. Shim Jae-chul said Monday, speaking of South Korea's richest man, calling for revising the pledge so as to provide pension selectively according to income levels of recipients.
"It is not desirable to carry out projects as promised when there is no budget," Shim said during a party meeting. "It would be good if we think about exit strategies for pledges requiring large-scale budgets that are realistically difficult (to implement)."
These remarks have sparked criticism that the ruling party is trying to backtrack on its pledges only a few weeks after the Dec. 19 election and even before the new government is launched, with some critics calling such a move "deception of the people."
According to Park's campaign promise, the incoming administration is supposed to raise 71 trillion won of the necessary 134 trillion won by cutting expenditures. The rest will be raised by scaling back tax breaks and exemptions, bringing more of the underground economy into the tax net and other measures.
Specifically, the government plans to tighten the reins on spending on non-essential projects and strengthen fiscal oversight over large projects to make sure no money is wasted. Tax benefits totaling some 29.8 trillion won will likely be scaled back.
The government also plans to step up efforts to recover non-performing bonds and improve financial health of public agencies to ensure they do not need any government funding. Another focus is on better detecting taxable income and preventing tax evasion.
Cracking down on the sale of impure gasoline is expected to be the first focus of efforts to uncover hidden tax sources. Ending the illegal practice would provide the government with at least 500 billion won in additional tax revenues, officials said.
The National Tax Service (NTS) wants to get access to financial information stored in the Korea Financial Intelligence Unit (KoFIU) for efforts to prevent tax evasion. Currently, such access is restricted due to concern over privacy violations.
"If we are going to implement the president-elect's campaign promises, we have to reduce expenditures as much as possible with an attitude of trying to squeeze (water) out of a dry towel," a finance ministry official said. "Large-scale SOC (social overhead capital) projects ... will likely be minimized."
Experts have warned, however, that these efforts will not be enough.
They stressed that the total amount of money for campaign promise projects was severely underestimated, saying that at least an additional 10 trillion won would be necessary every year to bankroll the senior pension and health care projects alone.
Major health care projects include expanding health insurance in phases to cover all costs for treatment of such illnesses as cancer, heart and cardiovascular diseases and other rare and hard-to-treat illnesses. Currently, 75 percent of the costs are covered for the illnesses.
This raises speculation that the incoming government will ultimately have to seek tax hikes.
"We will try to bring the underground economy above ground and take other measures to increase tax revenues. If these are not enough, however, we can consider directly raising taxes," said Rep. Hong Il-pyo during a radio interview. "But as to the scope (of tax hikes), tax rates should be determined based on a public consensus."