16 Trillion Won Tax Revenue Shortfall in Two Months... Corporate Tax Slightly Up, Income Tax Significantly Down

Last Month's National Tax Revenue Decreased by 9 Trillion to 11.4 Trillion
Cumulative National Tax Down from 70 Trillion to 54.2 Trillion
Ministry of Economy and Finance: "Base Effect, Positive Outlook for Q2"

Concerns over tax revenue shortfalls, which emerged at the beginning of the year, are growing. Following January, national tax revenue fell short by 9 trillion won again last month. Given these tax revenue conditions, there is a high possibility that this trend will continue next month, leading to views that this year’s national tax revenue will not meet the target.

According to the Ministry of Economy and Finance on the 31st, last month’s national tax revenue was 11.4 trillion won, down 9 trillion won (44.1%) compared to the same month last year. On a cumulative basis, total national tax revenue was 54.2 trillion won, falling short by 15.7 trillion won compared to last year’s 70 trillion won. All tax categories except comprehensive real estate tax and liquor tax decreased. Even considering various base effects such as reduced tax support, the actual tax revenue decline approaches 6.9 trillion won.

The progress rate was 13.5%, down 4.2 percentage points from 17.7% the previous year. This is the lowest level since 2005’s 11.7%. The tax revenue progress rate is an indicator comparing actual tax revenue to the government’s tax revenue target in the revenue budget. A decline in the tax revenue progress rate compared to last year means taxes are being collected more slowly.

Initially, the government predicted when preparing the budget that this year’s national tax revenue would reach 400.5 trillion won, 4.6 trillion won more than last year. However, even accepting the government’s explanation that this is due to base effects, about 7 trillion won less has been collected. This is why there are forecasts that achieving the tax revenue target will be difficult depending on the economic trend in the second half of the year.

The government currently maintains that the tax revenue shortfall is within the expected range. Jeong Jeong-hoon, Director General of Tax Policy at the Ministry of Economy and Finance, explained, “Although the economy is difficult this year, considering inflation and economic growth, we assumed some degree of growth and planned tax revenue accordingly. If the normal current flow continues, even if there is a negative in January and February, it will turn positive from the second quarter, and we judged that 400 trillion won would be achieved.”

Among domestic taxes, the largest decrease was in income tax. It fell by 6 trillion won from 30.4 trillion won last year to 24.4 trillion won this year. This is due to a decline in real estate transactions and a slowdown in the asset market, which shrank capital gains tax and comprehensive real estate tax. In particular, the base effect of extended interim payment deadlines for small-scale self-employed persons reduced comprehensive income tax by 2.2 trillion won.

For value-added tax, refunds increased and the base effect of tax revenue deferral due to tax support in the second half of 2021 overlapped, causing a decrease from 19.8 trillion won to 13.9 trillion won, a drop of 5.9 trillion won. Corporate tax decreased from 4.1 trillion won to 3.4 trillion won due to the overlapping base effect of 2022 tax revenue deferral caused by tax support in the second half. Traffic tax fell by 500 billion won due to the impact of the temporary fuel tax reduction measure.

Looking at February alone, income tax decreased by 5.2 trillion won from 17.2 trillion won last year to only 12 trillion won collected. Securities transaction tax nearly halved from 800 billion won to 400 billion won. This is because securities transaction volume, which reached 413.1 trillion won in January 2022, fell by 36.4% to 262.8 trillion won in January this year. Value-added tax decreased by 230 billion won, and traffic tax by 30 billion won.