[Exclusive] Budget Performance Bonuses Paid to National Tax Service and Korea Customs Service Amounting to 64 Million Won Due to Increased Imports

Ministry of Economy and Finance Pays 64 Million KRW Bonus Despite Fiscal Deterioration Due to Revenue Increase
Rep. Tae Urges Urgent Spending Restructuring Across Central Government
Ministry States Bonus Given Only for Intensive Efforts

[Asia Economy Reporter Jang Sehee] It has been revealed that the Ministry of Economy and Finance paid a budget performance bonus of 64 million KRW to the National Tax Service and the Korea Customs Service, which increased revenue without making any spending cuts. As fiscal soundness deteriorates, there are criticisms that bonuses are being paid simply for increasing revenue without any effort, resulting in wasteful use of tax money.

According to data submitted by the National Assembly Legislative Research Office upon request by Tae Young-ho, a member of the People Power Party, the Ministry of Economy and Finance paid performance bonuses totaling 134 million KRW to eight ministries, including the Korea Customs Service, National Tax Service, and Ministry of Land, Infrastructure and Transport, in the first half of this year. These agencies achieved a fiscal improvement effect of approximately 308.2 billion KRW.

Budget performance bonuses are paid based on achievements in spending savings and revenue increases. The National Tax Service and Korea Customs Service received 42 million KRW and 22 million KRW respectively as their revenues increased. The Defense Acquisition Program Administration and Ministry of National Defense, which saved expenditures, received 22 million KRW and 24 million KRW respectively. A Ministry of Economy and Finance official stated, "Legally, since the purpose is either spending savings or revenue increase, performance bonuses are paid if either condition is met."

A budget performance bonus is a system that pays contributors a portion of the saved budget or increased revenue when budget savings or revenue increases occur through improvements in budget execution methods or systems. The maximum bonus per person is 60 million KRW.

Past cases of performance bonuses paid to public officials include inducing voluntary correction reports from companies that gained illicit benefits through revenue declarations and providing information on tax payment errors by company to encourage faithful reporting?tasks that are naturally part of their duties but were recognized as achievements. Considering that the number of payments has recently been declining, there are calls to review the function of the system. The number of payments decreased from 57 cases in 2019 to 39 in 2020, and sharply dropped to 19 cases in the first half of this year.

However, in a situation where fiscal capacity is depleted after the COVID-19 pandemic, there are criticisms about the appropriateness of awarding performance bonuses simply because revenue increased without efforts to reduce the budget. The national debt ratio relative to Gross Domestic Product (GDP) will exceed 50% for the first time next year.

Overseas, the focus is on actual system improvements. Northern Ireland’s "Employee Suggestion Scheme" is a system that utilizes ideas proposed by public officials to improve the quality of public services for residents, distinguishing between quantitative and non-quantitative, one-time and repetitive suggestions related to budget savings, and providing different rewards accordingly. The Arizona state government in the United States allows public officials who develop cost-saving strategies in project execution and operation to receive a substantial portion of the savings as a personal bonus or to use it for next year’s budget reorganization.

Assemblyman Tae said, "It is questionable how the people, who are the sovereigns of fiscal authority, will accept the behavior of public officials receiving bonuses simply because revenue increased," and emphasized, "Rather than a rigid system focused on revenue increases by the National Tax Service and Korea Customs Service, expenditure restructuring across all central ministries is necessary."

Experts also advise that since budget performance bonuses are paid with tax money, performance evaluations need to be strict. Professor Hong Woo-hyung of Hansung University’s Department of Economics pointed out, "Since the fiscal scale has rapidly increased, the focus should be on reducing wasteful fiscal expenditures," adding, "Due to the nature of public officials’ jobs, it is very difficult to quantitatively measure performance, which is a limitation." Professor Park Jung-soo of Ewha Womans University’s Department of Public Administration advised, "Collecting revenue is the basic duty of the National Tax Service and Korea Customs Service," and said, "It is necessary to strictly distinguish and evaluate whether it was a normal work process or an innovative method."

The Ministry of Economy and Finance is also aware of the problems. Recently, it has been trying not to pay performance bonuses unless there is strong effort. The maximum payment amount per case has also decreased. The highest payment per case dropped from 50 million KRW in 2019 to 10 million KRW in the first half of this year, a reduction of 40 million KRW.