Corporate Tax Increases by 50% to 100 Trillion Won, 'Record High'... Impact of Strong Earnings Performance

Closing of Total Revenue and Expenditure for Fiscal Year 2022
Income Tax and Value-Added Tax Also Soar
Capital Gains Tax and Securities Transaction Tax Significantly ↓
Total Revenue 573.9 Trillion Won...Margin of Error -0.2%

[Asia Economy Sejong=Reporter Song Seung-seop] Last year, domestic corporate tax revenue increased by 50% compared to the previous year’s performance, surpassing 100 trillion won for the first time in history. This was due to a certain level of improvement in corporate performance despite concerns that business activities would shrink due to internal and external environments. Additionally, the Moon Jae-in administration raised the top corporate tax rate to 25%, which appears to have significantly increased corporate tax revenue.

According to the ‘2022 Fiscal Year Total Revenue and Total Expenditure Closing Results’ announced by the Ministry of Economy and Finance on the 10th, last year’s annual corporate tax revenue was recorded at 103.5704 trillion won. Although this fell short of the government’s initial estimate of 104.0662 trillion won, it increased by 33.1741 trillion won (47.1%) compared to the previous year’s results. This level far exceeds the record of 72.2 trillion won collected in 2019, when corporate tax revenue was at its highest. The government cited strong corporate performance as the reason for the increase in corporate tax revenue. It pointed out that the operating profit of KOSPI December-settlement corporations rose sharply by 58.2%, from 67.5 trillion won in 2020 to 106.8 trillion won in 2021.

The impact of the increased corporate tax rate, which continued from 2021, is also considered a contributing factor. Corporate tax revenue, which was around 52.1 trillion won (based on settlement) in 2016, began to rise after the Moon Jae-in administration applied the top rate of 25% (for large corporations with annual income exceeding 300 billion won) in 2018, up from 22%.

Along with corporate tax, income tax also improved significantly. Income tax, which was 114.1123 trillion won based on 2021 results, increased by 14.6363 trillion won (12.8%) to 128.7486 trillion won in 2022. Comprehensive income tax jumped 49.7% (7.9487 trillion won), from 15.9902 trillion won to 23.9389 trillion won. Earned income tax also grew by 21.6% (10.2106 trillion won), from 47.2312 trillion won to 57.4418 trillion won.

As income increased, consumption capacity improved, and inflation rose, value-added tax revenue also grew. Value-added tax collected totaled 81.6266 trillion won, 14.6% (10.4220 trillion won) more than the previous year.

However, capital markets contracted, leading to decreases in capital gains tax and securities transaction tax. Capital gains tax amounted to 32.2333 trillion won (-12.2%), and securities transaction tax was 6.3029 trillion won (-38.5%). Comprehensive real estate tax increased by 10.9% to 6.7988 trillion won compared to the previous year but was 21.1% less than initially expected.

As a result, total national tax revenue reached 395.9393 trillion won, an increase of 51.8611 trillion won (15.1%) compared to the previous year (344.0782 trillion won). General account national tax revenue was 385.1596 trillion won, up 52.6548 trillion won (15.8%), while special account national tax revenue was 10.7797 trillion won, down 7.937 billion won (6.9%).

Total revenue, including non-tax revenue, was 573.9 trillion won, and total expenditure was 559.7 trillion won. The fiscal year surplus was 14.2 trillion won. After deducting the carryover amount of 5.1 trillion won to the next year, the net surplus recorded was 9.1 trillion won. Tax revenue was 7.105 billion won less than the total revenue budget, with an error rate of -0.2%. The government explained that this was due to “faster-than-expected asset market slowdown, tax support for typhoon-affected companies, and deferred tax revenue.”