[2nd Supplementary Budget] This Year's Annual Excess Tax Revenue 31.5 Trillion Won... National Debt Repayment 2 Trillion Won

[Sejong=Asia Economy Reporter Moon Chaeseok] Although the government has decided to prepare a second supplementary budget worth 33 trillion won without incurring additional national debt, concerns about fiscal soundness still remain. This is because while the government reflected all of this year's excess tax revenue, estimated to be over 31 trillion won, in the supplementary budget, only 2 trillion won was allocated for national bond repayment. Considering that the national debt has increased by nearly 1,000 trillion won during the COVID-19 response, there are criticisms that the repayment amount is too small.

According to the Ministry of Economy and Finance on the 1st, this year's national tax revenue is expected to reach 314.3 trillion won, an increase of 31.5 trillion won from the initial 282.7 trillion won. This is because, as the economy shows signs of recovery, excess tax revenue is expected in some tax categories, including 12.2 trillion won from corporate tax, 2.7 trillion won from value-added tax, and 1.1 trillion won from dividend income tax. Including this, total revenue is expected to increase by 31.6 trillion won from the first supplementary budget to 514.6 trillion won, and total expenditure is expected to increase by 31.8 trillion won to 604.7 trillion won, according to the Ministry. Among this, the government decided to use 2 trillion won for national bond repayment, which will slightly reduce the national debt size to 963.9 trillion won and lower the debt ratio from 48.2% to 47.2% relative to the gross domestic product (GDP) by 1 percentage point. The integrated fiscal balance (total revenue minus total expenditure) as a percentage of GDP, which represents the national budget status, is also expected to improve by 0.1 percentage points to -4.4%.

However, considering that the excess tax revenue exceeds 30 trillion won, there are calls to increase the scale of national bond repayment and focus more on strengthening fiscal soundness. Professor Sung Tae-yoon of Yonsei University’s Department of Economics said, "The decision to prepare a supplementary budget at a time when the economy is recovering itself does not align with the purpose of the National Finance Act," but added, "Although deficit bonds are not being issued to raise funds, few would believe that the national treasury is replenished just because 2 trillion won was repaid."

The national debt was 660.2 trillion won when the Moon Jae-in administration took office in 2017, but it has rapidly increased every year, reaching 846.9 trillion won last year and 965.9 trillion won at the time of the first supplementary budget in March this year. It is projected to exceed 1,000 trillion won next year and reach 1,347.8 trillion won in 2024.

Regarding this, Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, recently stated at the second supplementary budget briefing, "If the government simply keeps the excess tax revenue in its pocket, it will cause a contraction in the private real economy." He added, "The supplementary budget was prepared without issuing deficit bonds to prevent the contraction effect on the private sector."

Some argue that according to the National Finance Act, excess tax revenue should be used first for debt repayment, but since this is not a final settlement, the prevailing counterargument is that there is no need to strictly follow this.

Professor Kim Sang-bong of Hansung University’s Department of Economics criticized, "This second supplementary budget is an act of spending money based on political judgment that goes against the purpose of supplementary budget preparation stated in the National Finance Act," and questioned, "What meaning does repaying 2 trillion won have when the public sector debt (D3), including central and local governments and public enterprises, exceeds 1,000 trillion won?"

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