Critics worry split could leave Finance Ministry 'just a tax agency'

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Critics worry split could leave Finance Ministry 'just a tax agency'

Published: 29 Sep. 2025, 14:23 Updated: 29 Sep. 2025, 19:36

Audio report: written by reporters, read by AI

A sign indicating the Ministry of Economy and Finance's offices in the government complex in Sejong is seen in this file photo. [MINISTRY OF ECONOMY AND FINANCE]

The National Assembly passed a revision to a law that will split the Ministry of Economy and Finance, or the Finance Ministry, into two separate entities — the ministry of finance and economy and the ministry of planning and budget — weakening the agency's role as a central policymaking control tower.

The move comes as the property market shows renewed volatility and trade talks with the United States stall, raising concerns among critics that the government's ability to respond to crises across ministries could erode.

The revised law, passed in a plenary session on Friday, will take effect Jan. 2 of next year, according to officials on Sunday. The Finance Ministry has already begun the separation process, forming a task force led by First Vice Minister Lee Hyoung-il and Second Vice Minister Lim Ki-keun to handle personnel restructuring and other details.

The ministry’s influence is expected to shrink regardless of how the details are finalized.

The government and the Democratic Party initially proposed creating a finance ministry that would absorb financial policy functions from the Financial Services Commission (FSC), giving it authority over macroeconomic policy, taxation and fiscal management, as well as finance. The aim was to decentralize the Finance Ministry's extensive power while maintaining its role as the nation’s “economic command center.”

But with the financial policy merger scrapped, the new ministry will oversee only taxation and macroeconomic policy. Within the ministry, officials have voiced frustration, with some saying “it’s now just a tax agency” and “we might as well drop the deputy prime minister title” in regard to Koo Yun-cheol, who acts as the deputy prime minister and Minister of Economy and Finance.

The Finance Ministry maintained that “the new ministry of finance and economy will continue to function as a deputy prime minister-level body and serve as the nation’s economic command center.”

Yet experts warn that without control over budget and financial policy, the ministry’s economic blueprints will lack depth.

“The economic deputy prime minister has lost both the status and capacity to lead policy,” said Seok Byoung-hoon, an economics professor at Ewha Womans University.

Koo Yun-cheol, minister of economy and finance, right, and Emmanuel Roman, CEO of Pimco, listen to President Lee Jae Myung’s remarks during the Korea Investment Summit at the New York Stock Exchange on Sept. 25. [JOINT PRESS CORPS]

Since its establishment in 2008, the Finance Ministry has not only managed fiscal and tax policy but also coordinated key economic agendas across ministries. It played a central role in responding to major national challenges, including the 2020 mask shortage during the Covid-19 pandemic, the 2021 urea solution shortage and the 2022 real estate project financing turmoil. The Finance Ministry often mediated competing interests among ministries to deliver coordinated solutions.

But the revised structure strips away its main levers of influence — the reward and punishment mechanisms it once used to steer policy.

“If a major cross-ministerial issue arises, leadership gaps could quickly become apparent,” said one government official. “In this setup, it will be difficult for the new finance ministry to exert meaningful leadership.”

Critics argue that efforts to rein in the ministry's power have gone too far, undermining policy coordination efficiency across the government.

The reorganization comes amid a challenging economic environment. After a brief period of stability, housing prices in Seoul have begun to surge again. The FSC and the Ministry of Land, Infrastructure and Transport are preparing separate policy measures, but the new finance ministry's role remains unclear.

Trade talks with the United States over tariffs continue to stall, while a recent fire at the National Information Resources Service exposed vulnerabilities in the government's digital infrastructure. Each issue demands close cross-ministerial coordination.

“If ministries push fragmented policies, duplication and confusion could increase,” a finance ministry official said.

President Lee Jae Myung, center, speaks with Minister of Economy and Finance Koo Yun-cheol, right, during a Cabinet meeting at the government complex in Sejong on Sept. 16. [JOINT PRESS CORPS]

With the Finance Ministry's coordinating power diminished, only the presidential office is now positioned to lead across ministries.

“The presidential office now has more authority but also more responsibility and pressure,” said Yang Jun-sok, an economics professor at the Catholic University of Korea.

Researchers warn that this concentration of power deepens a structural problem that has grown since the Moon Jae-in administration: an overpowered presidency.

“Even ministries with policymaking capacity increasingly look to the presidential office before taking action,” said one university professor. “In this kind of system, creative policies rarely thrive, and bureaucrats are rewarded for simply following top-down orders.”

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY JANG WON-SEOK [[email protected]]