I will read the article to you. The government estimated that this year’s tax revenue will fall short of the budget by 29.6 trillion won, marking the fourth consecutive year of significant tax revenue estimate errors. The Ministry of Economy and Finance has not yet revealed any measures to address the large tax revenue shortfall at the end of the third quarter of this year.
According to the Ministry of Economy and Finance’s announcement on the ‘2024 Tax Revenue Reestimate Results and Response Directions’ released on the 26th, the ministry re-estimated that this year’s tax revenue will be 337.7 trillion won. The budget for this year’s tax revenue passed by the National Assembly at the end of last year was 367.3 trillion won. The outlook is that actual tax revenue will be 29.6 trillion won lower than the budgeted tax revenue. The budget is composed of revenue estimates based on tax revenue forecasts and expenditure budgets.
The Ministry of Economy and Finance explained that the significant error in this year’s tax revenue estimate was due to the repercussions of economic slowdown last year exceeding expectations. Corporate earnings performance weakness and domestic market slowdown effects led to a corporate tax shortfall of 14.5 trillion won compared to the budget, and an income tax shortfall of 8.4 trillion won. It is also expected that a shortfall of 5.8 trillion won will occur in real estate transaction tax due to continued stagnation in the real estate market.
Repeated extensions of temporary fuel tax cuts and expansion of tariff allocations to address high prices have also increased the shortfall. It is estimated that revenue from transportation, energy, and environmental taxes, which include fuel taxes, will decrease by 4.1 trillion won compared to the budget. There is also a forecasted shortfall of 1.9 trillion won in customs duties compared to the budget.
Repeated significant estimate errors and resulting shortfalls increase the risk of project delays in the budget and further freeze the sluggish economy.
If tax revenues are collected according to the Ministry of Economy and Finance’s re-estimation, the error rate in this year’s tax revenue estimate (the shortfall amount compared to actual tax revenue) would reach 8.8%. This is the second-highest figure among historical tax revenue estimate errors following last year’s record tax revenue shortfall of 56.4 trillion won, which had an error rate of 16.4%.
Including excess tax revenues from 2021 and 2022, the significant estimate errors have occurred for four consecutive years. The excess tax revenues in 2021 were 61.3 trillion won and 52.2 trillion won in 2022. The total estimate error amount over the four years reached 199.5 trillion won.
The Ministry of Economy and Finance stated that they will analyze the causes of the four consecutive years of tax revenue errors and fundamentally improve the estimation process. They also pledged to enhance transparency by re-forecasting tax revenues for the corresponding year every September. While revealing the tax revenue re-estimation results, the ministry did not provide any specific measures to address the nearly 30 trillion won shortfall. They only stated their intention to utilize available funds and consider difficult-to-implement projects to ensure the sustainable execution of fiscal projects.
If the government were to dramatically reduce local government subsidy and local finance subsidy funds due to tax revenue shortfalls for the second consecutive year, it could make it difficult for the economy to recover. The Ministry of Economy and Finance emphasized minimizing the impact on people’s lives and the economy and continued to review ways to minimize the burden on local governments.
By Chae Hayan, Reporter [email protected]