[Weekly Review] 49 Trillion More Taxes Collected in First Half... Sharp Drop in Employment in Lodging and Food Services

Capital Gains Tax Increased by 7 Trillion Won, Securities Transaction Tax by 2 Trillion Won
Employment in Accommodation and Food Services Declines... August Employment Shock Expected to Worsen

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] From January to June this year, tax revenue in the first half of the year increased by 48.8 trillion KRW compared to the same period last year. However, due to the impact of the fourth wave of COVID-19, there are forecasts that the growth in tax revenue will slow down. Although the employment market was not directly affected by the COVID-19 pandemic, the face-to-face service sector took a direct hit.

◆Tax revenue increased by 49 trillion KRW in the first half alone= National tax revenue in the first half of this year increased by nearly 49 trillion KRW compared to the same period last year, driven by a faster-than-expected economic recovery and a favorable asset market. However, concerns over domestic demand weakness due to social distancing amid COVID-19 have further increased uncertainty over tax revenue in the second half.

According to the fiscal trend report released by the Ministry of Economy and Finance on the 10th, national tax revenue in the first half amounted to 181.7 trillion KRW. Corporate tax and value-added tax increased by 10.4 trillion KRW and 5.1 trillion KRW respectively compared to a year earlier, due to the economic recovery continuing since the second half of last year (July to December). Taxes related to the asset market, such as capital gains tax (7.3 trillion KRW) and securities transaction tax (2.2 trillion KRW), also increased by 13 trillion KRW compared to the same period last year, thanks to the boom in real estate and stock markets.

With revenue increasing more than expenditure, the fiscal deficit improved. The integrated fiscal balance deficit as of the end of June was 47.2 trillion KRW, down 42.8 trillion KRW from the same period last year. The managed fiscal balance deficit was 79.7 trillion KRW, a decrease of 30.8 trillion KRW compared to a year ago.

The government expects that although tax revenue in the first half exceeded expectations, this trend will slow down from the second half. More than half of the increase in tax revenue in the first half was due to one-off taxes from tax support effects and asset market-related taxes with high uncertainty.

◆Service sector employment hit hard by COVID-19 resurgence= According to the 'July Employment Trends' released by Statistics Korea on the 11th, the number of employees in accommodation and food services turned negative for the first time in four months. The decrease in employment in wholesale and retail trade also widened again. With the social distancing measures taking full effect in August, there are forecasts that employment indicators will worsen further.

According to the 'July 2021 Employment Trends' released by Statistics Korea on the 11th, the number of employed persons last month was 27.648 million, an increase of 542,000 compared to a year earlier. Starting with an increase of 314,000 in March this year, employment has been rising for five consecutive months.

However, employment in wholesale and retail trade decreased by 186,000, and employment in accommodation and food services, which had been increasing from April to June, fell by 12,000. Employment in other personal services also decreased by 50,000. Regarding this, Jeong Dongmyeong, Director of the Social Statistics Bureau at Statistics Korea, explained, "The survey period coincided with a time when private gathering restrictions due to social distancing were tightened, causing employment in accommodation and food services to turn to a decline. The overall increase in employment is due to the base effect from last year combined with strong export performance."

◆Exports from August 1 to 10 up 46.4% YoY= Exports from August 1 to 10 increased by more than 46% compared to the same period last year, continuing the export growth trend.

On the 11th, the Korea Customs Service announced that export value until the 10th of this month was 12.7 billion USD, up 46.4% (4.04 billion USD) from the same period last year. The cumulative export value this year also reached 371.4 billion USD, an increase of 27.2% (79.38 billion USD) compared to last year.

The number of working days until the 10th of this month was 7.5 days, 0.5 days more than the 7 days in the same period last year. Considering this, the average daily export value increased by 36.7%, from 1.24 billion USD last year to 1.7 billion USD.

By product category, exports increased compared to the same period last year in semiconductors (44.6%), petroleum products (33.0%), wireless communication devices (75.7%), and automobile parts (99.2%). Passenger cars (-39.0%) and home appliances (-15.8%) decreased. By country, exports increased to China (42.7%), the United States (55.8%), Vietnam (23.5%), the European Union (EU, 39.9%), Taiwan (83.0%), and Japan (46.5%).

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