This Year's 'Revenue Shortfall' Projected at 12.5 Trillion Won... Another 2 Trillion Won Increase in Three Months

National Tax Revenue Expected to Fall Below 370 Trillion Won... Impacted by Decreased Import Value-Added Tax, etc.

Revenue Shortfall for the Third Consecutive Year Virtually Confirmed... Government Plans to Respond with 'Unspent Funds'

National Tax Revenue (PG) [Produced by Lee Tae-ho] Photo Composite · Illustration

The scale of this year's revenue shortfall is projected to be approximately 2 trillion won larger than the 10 trillion won estimated three months ago.

The increase in the revenue shortfall is attributed to a decrease in import value-added tax due to the fall in exchange rates and an expansion of income tax refunds for individuals like delivery riders.

The Ministry of Economy and Finance announced the revised national tax revenue projection results on the 24th.

According to the revised projections, this year's national tax revenue is expected to be 369.9 trillion won. This is 33.4 trillion won more than last year's settlement (336.5 trillion won), which saw a significant revenue shortfall due to poor corporate performance.

However, following a reduction of 10.3 trillion won from the initial revenue budget in June, an additional 2.2 trillion won was cut in the subsequent three months, expanding the projected revenue shortfall for this year to approximately 12.5 trillion won.

This effectively confirms a revenue shortfall for the third consecutive year, following 56.4 trillion won in 2023 and 30.8 trillion won in 2024.

The government's initial projection for this year's national tax revenue, announced when the budget was compiled last year, was 382.4 trillion won.

However, economic slowdown and sluggish corporate performance following the 12.13 emergency economic measures, along with a worsening consumer sentiment, continued. In June, the government lowered its revenue projection to 372.1 trillion won through the second supplementary budget.

After the second supplementary budget, the decline in exchange rates became a concern. The average won/dollar exchange rate, which was 1,439 won from January to May, dropped to 1,379 won from June to August.

The fall in exchange rates led to a decrease in import value-added tax revenue. The government expected value-added tax revenue to decrease by 2.4 trillion won compared to the second supplementary budget.

Strong Dollar (PG) [Illustration by Yang On-ha]

The extension of the temporary reduction in fuel taxes to alleviate the burden of fuel costs is expected to further reduce transportation tax revenue by 900 billion won.

Comprehensive income tax revenue will also decrease by 1.1 trillion won due to policies that expand income tax refunds for individuals engaged in low-income services, such as delivery riders.

The projection for earned income tax has increased by 2.8 trillion won compared to the second supplementary budget, influenced by factors such as an increase in performance-based bonuses.

The special tax for agriculture and fisheries, levied on stock transactions, is expected to generate an additional 1.1 trillion won due to the recent stock market boom. However, the securities transaction tax on KOSDAQ market transactions is predicted to decrease by 700 billion won due to a decline in transaction volume.

Breaking down national tax revenue by accounting type, general accounts (358.2 trillion won) are expected to decrease by 3.2 trillion won from the second supplementary budget, while special accounts (11.7 trillion won) are projected to increase by 1.1 trillion won.

Despite the larger revenue shortfall, the government states that there are no significant issues with fiscal operations.

Considering that the government's unspent budget (unspent funds) annually amounts to 6-7 trillion won, the revenue shortfall is within a manageable level that can be addressed without significant new financial measures.

The government is pursuing an amendment to the State Finance Act to mandate a reassessment of revenue projections every September.

A Ministry of Economy and Finance official stated, "If we consider this year's revenue shortfall to be 12.5 trillion won, the error rate is about 3.3%," adding, "We believe this is relatively low compared to the average error rate of 4.8% over the past 10 years." Yonhap News