Real Estate-Fueled 'Tax Revenue'... National Tax Income Increased by 19 Trillion in Q1 (Comprehensive)

Ministry of Economy and Finance Publishes 'Monthly Fiscal Trends May Issue' on 11th
1Q National Tax Revenue Increases by 19 Trillion Won... Fiscal Deficit at 48.6 Trillion Won

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] National tax revenue in the first quarter of this year was recorded to be 19 trillion KRW higher than last year. Capital gains tax from housing transactions increased by about 3 trillion KRW compared to the previous year, and the government's tax support deferral of 1.2 trillion KRW for small individual business owners also contributed to the inflow in March. However, the managed fiscal balance, which reflects the actual fiscal situation, recorded a deficit of 48.6 trillion KRW.

According to the Ministry of Economy and Finance's 'Monthly Fiscal Trends May Issue' released on the 11th, national tax revenue in the first quarter of this year was 88.5 trillion KRW, an increase of 19 trillion KRW from last year. The national tax revenue progress rate was 31.3%, up 7.0 percentage points compared to last year's 4th supplementary budget.

An official from the Ministry of Economy and Finance explained, "Capital gains tax (provisional) increased by about 3 trillion KRW compared to the previous year, and the tax support deferral of about 1.2 trillion KRW to help self-employed individuals had a significant impact." Regarding future tax revenue forecasts, the official said, "To forecast annual tax revenue, we need to look at the comprehensive income tax filing in May and the value-added tax filing in July," adding, "The forecast will be made when the budget is formulated in August."

The three major tax categories forming the tax base (income tax, corporate tax, and value-added tax) all increased. In particular, income tax revenue (28.6 trillion KRW) increased by 6.4 trillion KRW due to an increase in real estate transaction volume and the payment of some deferred comprehensive income tax from small individual business owners. In fact, the volume of housing transactions from November last year to February this year increased by 1.7% compared to the same period last year.

Corporate tax revenue (20.2 trillion KRW) increased by 4.8 trillion KRW due to an increase in corporate operating profits last year. The operating profit of KOSPI-listed companies with December fiscal year-end last year was 67.5 trillion KRW, showing a 19.8% increase compared to 56.3 trillion KRW in 2019.

Other national tax revenues (13.3 trillion KRW), including comprehensive real estate tax, securities transaction tax, and stamp tax, also increased by 3.3 trillion KRW. Value-added tax revenue was 17.6 trillion KRW, up 2.7 trillion KRW from last year.

Besides national tax revenue, non-tax revenue (10.1 trillion KRW) such as fines and special corporate account operating income, and fund revenue (53.5 trillion KRW) also increased by 1.5 trillion KRW and 12.1 trillion KRW, respectively.

The integrated fiscal balance (total revenue - total expenditure) in the first quarter of this year recorded a deficit of 30.1 trillion KRW, and the managed fiscal balance, which represents the actual fiscal balance, recorded a deficit of 48.6 trillion KRW. Although national tax revenue increased, expenditures for responding to COVID-19 also increased accordingly. However, the deficit narrowed by 6.7 trillion KRW compared to a year ago. Total expenditure in the first quarter of this year was 182.2 trillion KRW, an increase of 17.4 trillion KRW from last year. The progress rate was 31.8%, up 2.1 percentage points from last year.

Regarding this, Ando Geol, the 2nd Vice Minister of the Ministry of Economy and Finance, evaluated, "A virtuous cycle of economic recovery driven by active fiscal management during the COVID-19 crisis and the resulting improvement in tax revenue has begun to appear."

Meanwhile, the Ministry of Economy and Finance plans to expand and reorganize the 'Monthly Fiscal Trends.' Going forward, it plans to enhance understanding of national finances by adding trends and reasons for fluctuations in fiscal indicators and details of execution.