Senior Executive Managing Director Hwang Youn-ha of the Korea Federation of Small and Medium Business, said the Yellow Umbrella Deduction System has been of great help to the financially-strapped biz owners and SMEs to keep their livelihoods and trying to recover their businesses in an exclusive interview with NewsWorld.
Following are excerpts of the interview:
Question: Can you tell us about the role of the Yellow Umbrella Deduction System?
Answer: The Yellow Umbrella Deduction System’s legal name is the Small and Small Businessmen Deduction System, which has been designed to help SMEs and small businesspeople in taking care of their problems brought about by the advancing age and closures of businesses to keep their livelihoods stable and get the chances to restart their businesses.
In the case of our country, when the owners of businesses fold their businesses, they can be in a lot of trouble. They not only find other businesses difficult, but also to continue to support their families in many cases. The Yellow Umbrella Deduction System was launched to just to help solve these kinds of problems with government officials, parliamentarians and private business leaders locking their brains to set the system up.
The funds set up by the members of the system, say from 50,000 won to one million won in installments, the government will not only give tax exemption, but also pays interests on the funds and furthermore, no creditors can impound the funds under the law.
Q: What is the present status of membership of the system and its prospect?
A: The system since launching in September, 2007, has been growing around more than 30 percent annually. As of Oct. 31, the membership came to 470,000 and next year, it is expected to grow to over 600,000.
Q: How big is the fund paid by the members of the system now and the future outlook for the fund?
A: As of Oct. 31, the funds paid by the members so far this year amounted to 834.8 billion won and by the end of this year, the fund is likely to total 2.8 trillion won and 3 trillion won by the end of next year without much trouble.
Q: Can you tell us the kinds of benefits for the members of the system?
A: Any employee of the business firms with less than 50 employees and owners of the business firms with less than 10 employees can be members of the system. As of the end of 2012, the number of small business owners totaled 3.25 million and around 14.5 percent of them or 470,000 are members of the system. In order to have more of them to be members of the system, we plan to step up the campaigns and at the same time, expand the channels for membership for them.
The biggest benefit for the members is that their earnings amounting to 3 million won can get a tax exemption annually, which means they can save some 1.25 million won in taxes, which comes to around 40 percent in interests.
Also, the funds made up of the members installment payments cannot be impounded by law, which would not only secure the stable livelihoods for the members even during the economic crises, but also help SMEs to recover the businesses. Furthermore, interests will be paid on the funds and no expenses taken off as the system is a non-profit organization.
Q: What are mid-to long-term strategies of the system?
A: We have the vision that the system’s membership would grow to around 1 million by 2020 with 10 trillion won in total funds paid up by the members so that the system would be a representative social safety net in Korea.
We will try to expand the channels for membership of the system so that more small businessmen can apply for membership and at the same time, strengthen our cooperative ties with other organizations to boost the membership.
We will also increase the TV ads so that the people would understand the system is a warm and friendly set up. We will expand our social service activities also through such programs as the “Happy Biz Life” and other social service programs.
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