Corporate Tax Shrinks by 17 Trillion Won... Capital Gains Tax and Securities Transaction Tax Revenues Surge, Resulting in 9 Trillion Won Surplus Last Year

Ministry of Economy and Finance Announces Final Results of Total Revenue and Expenditure for Fiscal Year 2020

[Sejong=Asia Economy Reporter Kim Hyunjung] Although corporate tax revenue fell by nearly 17 trillion won compared to the previous year due to poor corporate earnings, related tax revenue surged thanks to the booming real estate and securities markets, resulting in a surplus of more than 9 trillion won in the global surplus last year. The tax revenue effect from the asset market boom compensated for the decrease in corporate tax revenue caused by the adverse impact of COVID-19.

On the 9th, the Ministry of Economy and Finance announced the closing results of the total revenue and total expenditure for the 2020 fiscal year, reporting that total revenue last year was 465.5 trillion won and total expenditure was 453.8 trillion won. The settlement surplus, which is the difference between total revenue and total expenditure, was 11.7 trillion won, and after deducting the carryover amount of 2.3 trillion won, the global surplus recorded a surplus of 9.4 trillion won.

Excluding deposits, fines/confiscations and penalties, and previous year carryovers from total revenue, national tax revenue was 285.5462 trillion won, down 7.9081 trillion won (2.7%) from last year, but compared to the revenue budget (279.7123 trillion won), it increased by 5.8339 trillion won (2.1%).

By tax item, corporate tax was 55.5132 trillion won, which was 16.6611 trillion won (-23.1%) less than the previous year. This is due to poor corporate performance from 2019 to the first half of 2020 and a base effect from the sharp increase in corporate tax revenue in 2017-2018. According to the Ministry of Economy and Finance, operating profit of KOSPI-listed companies fell from 112 trillion won in 2018 to 56 trillion won in 2019 and 30.3 trillion won in the first half of 2020. Compared to the government budget, it was also 2.9621 trillion won (-5.1%) less collected.

On the other hand, related tax revenue increased significantly from last year due to the sharp rise in asset prices such as real estate and stocks and the resulting increase in transactions, surpassing even the Ministry of Economy and Finance’s expectations. The number of housing transactions, which was about 805,000 households in 2019, rose 58.9% to 1.279 million households last year, and securities trading value jumped 149.5% from 2,288 trillion won to 5,709 trillion won, resulting in capital gains tax revenue of 23.6558 trillion won last year. This is not only an increase of 7.5547 trillion won (46.9%) compared to the previous year but also exceeds the government budget (17.4041 trillion won) by 6.2517 trillion won (35.9%).

Although the number of employed persons decreased by 218,000 due to the impact of COVID-19, earned income tax revenue increased by 2.4391 trillion won (6.3%) compared to the previous year. This is interpreted as a result of decreases in the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) (-400 billion won). Due to the rise in asset prices and increased gifts, inheritance and gift tax revenue reached 10.3753 trillion won, up 24.6% from 2.0462 trillion won the previous year and 23.3% compared to the budget (8.4165 trillion won).

With the stock market boom, stock investment surged and trading volume increased, causing securities transaction tax revenue to rise sharply. Last year, securities transaction tax revenue was 8.7587 trillion won, a 95.8% increase from 4.2854 trillion won the previous year. Compared to the budget (4.935 trillion won), it was 77% higher. Additionally, due to the increase in the fair market value ratio (from 85% to 90%) and the rise in official real estate prices, comprehensive real estate tax increased by 34.8% from the previous year to 3.6006 trillion won.

On the other hand, due to the increase in local consumption tax rate (from 15% to 21%), decrease in exports/imports, and nominal private consumption, value-added tax revenue decreased by 8.4% from the previous year to 64.8829 trillion won. This is about 0.5% below the budget (64.5841 trillion won).

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