Concerns about the fiscal situation are growing as tax revenues have fallen by the largest amount on record.
Opposition parties are calling for a supplementary budget to reduce the fiscal burden, but the government and the ruling party have drawn a line in the sand, saying they can still cope.
According to the Ministry of Strategy and Finance’s April tax revenue report, tax revenue from January to April this year stood at 134 trillion won.
This is 33.9 trillion won less than the 167.9 trillion won collected in January-April last year, the largest drop ever.
The tax revenue progress rate, which looks at how much tax revenue has been collected from the 400.5 trillion won target set in this year’s budget, stood at 33.5 per cent, also a record low.
The monthly trend is also not good.
The year-on-year decline in tax revenue increased from 6.8 trillion won in January to 9.0 trillion won in February, before shrinking slightly to 8.3 trillion won in March.
In April, the country collected 9.9 trillion won less than last year’s April, which is even more shocking because it is the month for filing corporate tax installments and interim value-added taxes, which is usually a time of abundant tax revenue.
The largest tax revenue decline in history…9.9 trillion won in April due to sluggishness in the three major tax categories
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This is the aftermath of a simultaneous decline in the three major taxes – income tax, corporate tax, and value-added tax – due to the recession.
In the first four months of this year, corporate taxes collected 35.6 trillion won, down 30.7 per cent from the same period last year.
The real estate downturn also led to a 20 per cent drop in income taxes over the same period, collecting 8.9 trillion won less, while value-added tax revenue fell 9.6 per cent, or 3.8 trillion won.
Even if taxes are collected at last year’s level by the end of the year, the country is still 38.5 trillion won short of this year’s target.
In the case of capital gains tax, which is the main reason for the decline in income taxes, transactions in March are reflected in May because they are reported two months after the transaction.
According to April housing statistics, the number of home sales transactions fell by 2.1 per cent in March and 18.6 per cent in April from a year earlier, making it unlikely that transfer tax revenues will increase after May.
The only possibility that remains is the “doom and gloom” that has been used to forecast the economy this year.
If the economy, which has been in a deep slump due to weak exports, picks up in the second half of the year, tax revenues could rise.
However, the outlook is not bright.
According to Statistics Korea’s April industrial activity trend, domestic production shrank by 1.4 per cent from the previous month, the first decline in five months. Consumption also fell by 2.3 per cent month-on-month.
Remaining hopeful ‘do’ is also unlikely…Ministry of Finance admits tax revenue deficit this year
The manufacturing inventory rate hit 130.4 per cent, the highest since the statistics were compiled, and semiconductor stocks rose 31.5 per cent from the previous month.
Expert organisations have also revised their forecasts downward. The Korea Development Institute (KDI) lowered its economic growth forecast for the second half of this year to 2.1 per cent from 2.4 per cent.
In the end, the ministry admitted to a tax revenue deficit this year.
“Even if the economy is ‘up and down’, it doesn’t mean that ‘up’ can recover all of the 34 trillion won in tax revenues so far, and a tax revenue deficit is inevitable this year,” said Jeong Jeong-hoon, chief tax policy officer, while explaining the ‘April tax revenue status’ on 31 March.
The problem is the size of the deficit. “The size of the tax revenue deficit will be clearer when we receive the comprehensive income tax this month and the value-added tax in July,” Jeong added.
In this regard, Chu Kyung-ho, Deputy Prime Minister and Minister of Economy and Trade, said at a press conference the day before, “We will announce the official tax revenue re-estimation results in August or early September at the latest.”
This is a step back from his April stance that it was too early to comment on the re-estimates, and an acknowledgement by the ministry that there is a large error in their tax revenue estimates.
The main opposition Democratic Party of Korea has been stepping up pressure for a supplementary budget amid fears that this year’s tax revenue deficit could be the largest ever, in the billions of trillions of won.
At the party’s top committee meeting on the 2nd of this month, party leaders, including Lee Jae-myung, unleashed a barrage of attacks on the economy.
“The government must now prepare countermeasures to normalise exports and recover the economy,” Lee said, adding, “Special measures to support the lives of ordinary people and revive the stagnant economy, as well as the supplementary budget, must be considered.”
野 “Extraordinary measures for economic recovery should be appropriated” 秋 “No review at all” even under pressure
Park Kwang-woon, leader of the Democratic Party of Korea. Reporter Yoon Chang-won
Park Kwang-woon said, “The economy is in an emergency situation메이저사이트. Especially exports are very serious. The same is true for domestic demand,” and Park Chan-dae, a top committee member, said, “What are Yoon Seok-yeol and the ruling party doing when economic growth is not recovering from the stagnation crisis?”
But despite the opposition pressure, Chu has remained consistent in his opposition to the budget.
At a press conference on the 30th of last month, he said, “The budget is set to issue about 60 trillion won in deficit sovereign bonds this year,” adding, “I will not consider the supplementary budget at all, with the intention of not incurring additional debt.”
The global surplus, which excludes local government taxes, is 2.8 trillion won, and the special account surplus, which has no restrictions on use, is 3.1 trillion won, which is less than 6 trillion won.
This is why one of the measures being discussed is the unspent budget, which refers to the budget that is left over when a planned project is cancelled or when circumstances arise that make it difficult to execute the project in the current year.
In 2013 and 2014, the government set aside 18.1 trillion won and 17.5 trillion won, respectively, to address revenue shortfalls.
However, while there is a possibility that the tax revenue deficit will exceed 30 trillion won this year, the average size of the unspent budget in the last five years has been 8.86 trillion won, so it is unclear whether it will be enough.
For this reason, the government is also discussing the need to revise the tax law to increase revenues by revising the fair market value ratio of previously discounted taxes such as individual consumption tax and petrol tax, as well as the comprehensive real estate tax.
Sung Tae-yoon, a professor of economics at Yonsei University, told CBS News North Carolina.