Corporate Tax Shortfall of 7 Trillion Won... Last Year's Tax Revenue Deficit for the First Time in 5 Years

1.3 Trillion Won Deficit, First Loss Under Moon Administration
Impact of Semiconductor Market Slump and Worsening Corporate Earnings

[Sejong=Asia Economy reporters Kim Hyunjung and Joo Sangdon] Despite the increase in the top tax rate, corporate tax revenue fell short by more than 7 trillion won compared to expectations, resulting in a tax revenue deficit last year for the first time in five years. This was due to a decline in interim tax payments caused by worsening performance of major companies amid a sluggish semiconductor market. This year, too, various negative factors have emerged since the beginning of the year, leading to forecasts that corporate tax revenue will decrease for the first time in six years since 2014.

On the 10th, the Ministry of Economy and Finance announced the closing results of the total revenue and total expenditure for the 2019 fiscal year, reporting total revenue of 402 trillion won and total expenditure of 397.3 trillion won last year. The settlement surplus, which is the difference between total revenue and total expenditure, was 4.7 trillion won, and after deducting a carryover of 2.6 trillion won, the final surplus recorded a 2.1 trillion won surplus.

National tax revenue, excluding deposits, fines, confiscations, penalties, and previous year carryovers from total revenue, amounted to 293.4543 trillion won, a decrease of 116.1 billion won from the previous year. However, compared to the revenue budget (294.8 trillion won), this represented a deficit of about 1.3 trillion won. This tax revenue deficit, where national tax revenue was less than the revenue budget, appeared for the first time in five years since 2014 (10.9 trillion won). It is the first deficit under the Moon Jae-in administration. Based on the margin of error, the deficit rate was -0.5%, the lowest in 17 years since 2002 when it was 0.3%.

By tax category, corporate tax was collected 7.0758 trillion won (8.9%) less than the original budget (79.2501 trillion won). Although this was an increase of 1.2 trillion won compared to last year, considering that the top corporate tax rate was raised by 3 percentage points from 22% to 25%, this figure was far below expectations. The biggest cause was the poor performance of corporations. The Ministry of Economy and Finance explained, "The decline in interim tax payments due to poor corporate performance in the first half limited the increase." In fact, the consolidated operating profit of companies listed on the KOSPI market in the first half of this year was 55.1 trillion won, a sharp drop of 37.1% compared to 87.5 trillion won in the first half of the previous year. Additionally, deficits were recorded in customs duties (-1.1736 trillion won, -13%), comprehensive income tax (-1.0135 trillion won, -5.7%), individual consumption tax (-580.4 billion won, -5.6%), and special rural development tax (-261.7 billion won, -6.3%).

On the other hand, tax categories that collected more than the original revenue budget included value-added tax (2.0764 trillion won, 3%), capital gains tax (1.9346 trillion won, 13.7%), earned income tax (1.2485 trillion won, 3.4%), and inheritance and gift tax (1.1012 trillion won, 15.2%).

This content was produced with the assistance of AI translation services.