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Corporate economic downturn direct hit… 16.7 trillion in corporate tax decreased
According to the Ministry of Strategy and Finance on the 9th, as a result of the closing of the total revenue and expenditures for fiscal 2020, total revenue was 465 trillion won, an increase of 63.5 trillion won from the previous year.
National tax revenue was 28.5 trillion won, down 7.908 trillion won from the previous year. This is the highest level ever since 1990, when statistics related to national taxes were prepared in the e-Nara Indicator, a system for monitoring national government, compared to the previous year.
The size of national tax revenue itself is the lowest since 2017 (265 trillion won). There was an expectation at one time to surpass 300 trillion won in tax revenues due to the strong sales performance of the company, but it returned to the level of three years ago due to the aftermath of the Corona 19 incident.
Kim Tae-joo, director of tax policy at the Ministry of Equipment, analyzed, “This is because the corporate performance in 2019 and 2020 was sluggish, and the consumption decline (due to the impact of Corona 19) was reflected.”
By major tax category, corporate tax (55.51 trillion won) decreased by 16.7 trillion won from the previous year due to the economic downturn. As economic activity contracted, tariffs (7.6 trillion won) and liquor taxes (3 trillion won) also decreased by 800 billion won and 500 billion won, respectively. As the rate of VAT transfer to provinces increased from 15% to 21%, related tax revenues also decreased by 5.9 trillion won.
On the other hand, due to the increase in real estate and stock trading volumes, the transfer tax (23.66 trillion won) increased by 7.6 trillion won and the securities transaction tax (8.76 trillion won) increased by 4.4 trillion won. As the number of gifts such as real estate increased, the inheritance and gift tax also increased by 2 trillion won to 10.38 trillion won.
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“Limited financial resources and disaster subsidies must be paid separately”
Although tax revenues decreased, expenditures increased significantly due to the four additional arrangements. The total expenditure from January to November of last year was 501.1 trillion won, which has already exceeded 500 trillion won.
The consolidated fiscal balance, minus total expenditure from gross income, recorded a deficit of 63 trillion won as of November last year. The management fiscal deficit excluding the Social Security Fund from the integrated fiscal balance soared to 98.3 trillion won. The national debt is also 86.2 trillion won, the largest in history.
Last year’s exact fiscal balance and national debt are scheduled to be released in early April after finishing the total expenditure count. As the government organized the fourth supplementary administration, it expected a deficit of 111.6 trillion won in managed fiscal balance last year and 84.6 trillion won in national debt.
The fiscal burden increased even further as the’super budget’ of 558 trillion won was created this year. The government predicts that this year’s national debt will increase by 100 trillion won in a year to 956 trillion won.
As discussions on the 4th disaster subsidy payment intensified from the beginning of this year, additional financial expenditures are expected to be inevitable. The size of the additional budget is estimated to be around 20 to 30 trillion won, which should be covered by issuing deficit government bonds. In this case, it is observed that the level of national debt may reach the level of 1,000 trillion won, which is about 50% of gross domestic product (GDP).
The fiscal capacity is relatively good compared to other countries, but the rapid deterioration of fiscal soundness is acting as a burden. Deputy Prime Minister Hong Nam-ki and Minister of Economy, Trade and Energy also pointed out on the 5th in a question to the government of the National Assembly that “the share of national debt is more healthy and more spacious than any other country, but the rate of increase and the issue of national creditworthiness should also be considered.”
Professor Kim Woo-cheol of the Department of Taxation at the University of Seoul said, “Due to the rapid increase in debt in the process of responding to Corona 19, the national debt ratio could exceed 80% within 10 years without extreme fiscal consolidation measures.” As it is necessary to promote efficiency in spending, disaster subsidies should be selectively supported from limited resources.”