[Free Speech] Strengthening Labor Union Accounting Transparency Is Essential

As part of labor reform, the government is emphasizing the accounting transparency of labor unions. Accounting provides information that enables an organization’s stakeholders to make rational decisions. Most organizations are legally required to provide accounting information. The greater the transparency of accounting, the stronger the foundation for a fair and transparent society.

At present, the accounting transparency of labor unions remains institutionally inadequate. Article 25 of the Trade Union and Labor Relations Adjustment Act stipulates that labor unions must conduct accounting audits and disclose the audit results to their members. However, because the qualifications of accounting auditors are not specified, it is difficult to ensure their expertise and independence. Article 26 of the same Act requires the representative of a labor union to disclose the year-end financial results and operational status for each fiscal year. The government has pointed out that the timing and method of such disclosure are not clearly defined.

Unlike other donation-receiving organizations, labor unions receive tax deduction benefits without any accounting disclosure. Union dues are treated as donations under the special tax credit provision of the Income Tax Act. Union members receive a tax credit equal to 15% of the money they pay in dues. In effect, the tax credit for union dues amounts to supporting union activities with taxpayers’ money. Accordingly, an appropriate level of public accountability and transparency must be secured.

Although the social role and influence of labor unions have grown disproportionately, unions receive support from taxpayers through benefits such as tax credits on union dues and government subsidies. Moreover, labor unions participate in a wide range of public decision-making processes beyond the workplace. Given that labor unions have long demanded transparency from businesses, the time has come for unions to strengthen their own social responsibility and transparency.

Last June, the government gave legislative notice of proposed amendments to the Enforcement Decree of the Trade Union and Labor Relations Adjustment Act and the Enforcement Decree of the Income Tax Act. The purpose is to strengthen labor unions’ responsibility for accounting management. The key provisions of the proposed amendments include specifying qualifications to enhance the expertise of labor union accounting auditors, establishing rules on the timing and method of disclosing financial settlement results in order to protect union members’ right to know, and granting tax deduction benefits for union dues on the condition that labor unions disclose their accounts.

Labor unions must now develop on the basis of transparent accounting. Since union dues are made up of a portion of workers’ hard-earned wages, the right of union members and the public to know must be guaranteed. Strengthening the accounting transparency of labor unions will become the foundation of their autonomy and democracy. Through stronger accounting transparency, I hope labor unions will earn the trust of both their members and the public.

Hyojin Yoo

Intern Researcher, Center for Free Enterprise (CFE)

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Original title: [자유발언대]노동조합 회계 투명성 강화는 필수

Author: Hyo-jin Yoo

Date: 2023-08-25

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&pn=6&idx=25975