By Jon Herskovitz
SEOUL, Sept 1 (Reuters) - Tax cuts and labour reform topped the agenda as South Korea started a new session of parliament on Tuesday, just ahead of an expected cabinet shake-up to strengthen the president's push for deeper economic reforms.
President Lee Myung-bak, a former CEO who pledged business-friendly reforms to help South Korea better compete with regional rivals Japan and China, has seen many of his proposals stalled by bickering in parliament.
Expectations for this session were low with enthusiasm for tax cuts tempered by worries within Lee's ruling, conservative Grand National Party they may add to yawning deficits from earlier government spending to help the export-driven economy get through the global economic slowdown.
Signs that Asia's fourth-largest economy may be pulling out of the slump faster than initially expected have eased pressure on lawmakers to push through reforms.
Lee was able to get tax cuts passed in the past year that lowered rates by two percentage points to 11 percent for businesses with taxable income of less than 200 million won ($160,400) while personal income tax rates were cut by two to three percentage points for many low-to-mid wage earners.
Parliament may delay a plan proposed for this session for an additional 1 percentage point tax cut for businesses and individuals starting from 2010, GNP lawmakers told local media.
"If the GNP delays the bill, then there won't be any conflict with the other parties," said Jeong Chan-soo, the executive director of Min Political Consulting.
Another key bill before parliament would double to four years the period for which employers can hire temporary workers, which would give managers greater flexibility to hire and fire staff in a rigid labour market.
MID-TERM BLUES
Lee, who has seen his support numbers improve as the economy has picked up, faces the middle years of his single five-year term. He wants to avoid the fate of many of his predecessors who saw their power and prestige fall in the period as a fickle public turned its attention to the race for the next leader.
Lee shuffled his top aides on Monday to strengthen his team for a mid-term push as he presses for pension reform, adding greater flexibility to financial services and winning approval for a trade deal with the United States.
Analysts said he also wants to appear as more of a centrist and will push welfare measures in order to widen his support.
Lawmakers are not expecting to ratify the U.S. trade deal in this session, which lasts 100 days, unless there is some movement in Washington, a senior GNP member said.
Lee's shake-up is expected to reach eventually into his cabinet and could include replacing the prime minister, whose role has often been steering legislation through parliament.
The 299-seat National Assembly is also trying to get its own house in order by looking at sweeping constitutional changes after criticism for failing to pass needed laws and serving as a source of global mockery for brawls in the body.
"The National Assembly must no longer show an image of confrontation and crippled operation," speaker Kim Hyong-O told foreign reporters last week.
A nonpartisan panel of lawmakers this week proposed changing from a unicameral legislature to one with two houses, and revising the presidency from a single, five-year term to a four-year term with a chance to stand once for re-election.
($1=1,246.7 won) (Additional reporting by Christine Kim, editing by Jonathan Thatcher and Jerry Norton)