National Tax Revenue Increased by 43.6 Trillion Won from January to May...But Uncertainty in Asset Tax Revenue Rises in the Second Half (Update)

Ministry of Economy and Finance Announces 'Monthly Fiscal Trends July Issue' on 8th
Corporate and Income Taxes Up... 3.25 Trillion Won Increase Excluding Last Year's Tax Support Effects

[Asia Economy Reporter Jang Sehee] Due to increased real estate and stock transactions and economic recovery, the government’s tax revenue from January to May this year rose by 43.6 trillion KRW compared to the same period last year. The national budget deficit still recorded a deficit of 48.5 trillion KRW as expenditures increased during the COVID-19 response.

According to the 'Monthly Fiscal Trends July Issue' published by the Ministry of Economy and Finance on the 8th, national tax revenue until May this year amounted to 161.8 trillion KRW, an increase of 43.6 trillion KRW compared to the same period last year. However, the ministry explained that excluding the base effect from last year’s tax support, national tax revenue from January to May increased by 32.5 trillion KRW compared to one year ago. The progress rate, which indicates the ratio of actual collected taxes to the annual tax collection target, was 57.2%, up 15.8 percentage points from a year earlier.

Since the second half of last year, corporate performance improved faster than expected due to the recovery trend, resulting in corporate tax increasing by 11.8 trillion KRW to 37.9 trillion KRW, and value-added tax rising by 4.3 trillion KRW to 33.6 trillion KRW.

Additionally, capital gains tax increased by 5.9 trillion KRW due to the heated real estate market, and securities transaction tax rose by 2.2 trillion KRW due to the stock market boom. The base effect from tax revenue increases caused by tax support measures that deferred taxes payable from January to May last year to the second half of last year or this year amounted to 11.1 trillion KRW, and inheritance tax also increased by 2 trillion KRW.

Accordingly, total revenue, combining national tax revenue, non-tax revenue, and fund revenue, reached 261.4 trillion KRW, an increase of 53.2 trillion KRW compared to the same period last year.

Total expenditures until May were 281.9 trillion KRW, up 22.4 trillion KRW from a year earlier, due to active spending for strengthened COVID-19 prevention, damage support, and employment stabilization.

Despite increased spending, the deficit narrowed due to strong tax revenue. The integrated fiscal balance recorded a deficit of 20.5 trillion KRW until May, reducing the deficit by 40.8 trillion KRW. The managed fiscal balance, which excludes the four major social security funds from the integrated fiscal balance to show the government’s actual fiscal condition, recorded a deficit of 48.5 trillion KRW. The deficit narrowed by 29.4 trillion KRW compared to a year ago. As of May, the national debt balance stood at 899.8 trillion KRW.

Meanwhile, the government expects tax revenue not to increase significantly in the second half of the year. It analyzed that the asset market faces uncertainties such as a slowdown in real estate and stock transactions compared to last year. Furthermore, the base effect from deferred payments is expected to be eliminated.

The Ministry of Economy and Finance explained, "There are uncertainties such as the reduction of securities transaction tax and the increase of capital gains tax," adding, "Asset-related tax items such as capital gains tax and securities transaction tax have no consistent trend and tend to fluctuate significantly depending on asset market trends." It continued, "Due to the base effect from last year’s deferred payments, tax revenue in the second half of this year appears larger compared to the previous year," and "Since the deferred payments from the first half of last year have already been paid in the second half of this year, the base effect is expected to gradually disappear."

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