This Year’s 'Tax Revenue Shortfall' 29.6 Trillion Won... Government Forecasts Missed for 4 Consecutive Years

Ministry of Economy and Finance Announces '2024 Tax Revenue Reforecast Results'
Corporate Earnings Decline and Weak Asset Market Lead to Sharp Drops in Corporate and Capital Gains Taxes

This year, national tax revenue is projected to fall short by 29.6 trillion won compared to expectations in the government budget. The shortfall is due to a larger-than-expected deficit in corporate tax revenue and an expanded deficit in major tax revenues such as capital gains tax caused by a sluggish real estate market. To maintain a sound fiscal policy, the government plans to overcome the tax revenue shortfall by mobilizing all available financial resources, including surplus funds from various funds, without issuing additional government bonds through a supplementary budget (추경).

On the 26th, the Ministry of Economy and Finance announced the results of the "2024 National Tax Revenue Re-estimate," reflecting the interim corporate tax prepayment performance for August. This year’s tax revenue is estimated at 337.7 trillion won, which is 29.6 trillion won (8.1%) less than the revenue forecast in last year’s year-end revenue budget (367.3 trillion won). This means that actual tax revenue is 8.1% lower than the government’s originally planned budget for this year.

The main cause of this tax revenue shortfall is that corporate performance deterioration last year was worse than expected, leading to a decrease in major tax revenues such as corporate tax. Among the three major tax categories this year, corporate tax and income tax are expected to drop sharply by 14.5 trillion won and 8.4 trillion won respectively compared to previous forecasts, while value-added tax is projected to increase by 2.3 trillion won. Additionally, inheritance and gift tax (500 billion won), securities transaction tax (400 billion won), transportation, energy, and environmental taxes (4.1 trillion won), and customs duties (1.9 trillion won) are also expected to decline.

As a result, the government’s tax revenue estimates have recorded large errors for four consecutive years. This is a significant forecasting error following last year’s record-high error rate of -14.1% based on tax revenue shortfalls. In 2021 and 2022, tax revenues exceeded expectations, resulting in estimation errors of 21.7% and 15.3%, respectively. The Ministry of Economy and Finance plans to cover the tax revenue shortfall of over 29 trillion won using existing resources without preparing a supplementary budget for additional government bond issuance. The ministry stated, "The preparation of a supplementary budget is a measure used supplementarily for exceptional reasons such as an economic recession," and added, "We will prioritize responding by utilizing available resources within the government."