[2022 Budget] Next Year's Tax Revenue Increases by 24 Trillion Won... Asset Tax Revenue Shrinks

Corporate and VAT Revenues Expected to Reach Record Highs... Capital Gains and Securities Transaction Taxes Decline
Government: "Tax Revenue Growth Rate Up After Crisis, Not an Optimistic Outlook"

[Asia Economy Reporter Jang Sehee] Due to a faster-than-expected economic recovery, next year's national tax revenue is projected to increase by 24.4 trillion KRW compared to this year. Despite the COVID-19 pandemic, domestic companies continue to show growth in performance, and private consumption indicators are maintaining a favorable trend. Additionally, comprehensive real estate tax revenue is expected to rise by 29.6%. However, revenues from asset-related taxes such as capital gains tax and securities transaction tax are forecasted to slightly decrease.

On the 31st, the Ministry of Economy and Finance announced the "2022 National Tax Revenue Budget Plan" containing these details. If the budget plan is the government's expenditure plan, the revenue budget is the government's forecast of income. The government projected next year's national tax revenue budget at 338.649 trillion KRW. This figure represents a 7.8% (24.3674 trillion KRW) increase compared to this year's national tax revenue budget forecast of 314.2816 trillion KRW, which was estimated during the second supplementary budget this year.

Corporate Tax, VAT, and Income Tax Expected to Increase as the 'Three Pillar Taxes'... Securities Transaction Tax to Decrease

By tax category, corporate tax and VAT are expected to reach record highs. The corporate tax revenue forecast is 73.781 trillion KRW, a 12.6% (8.2345 trillion KRW) increase compared to this year's corporate tax forecast during the second supplementary budget. Next year's VAT is projected at 76.054 trillion KRW, up 9.7% (6.7066 trillion KRW), and income tax at 105.002 trillion KRW, up 5.6% (5.5277 trillion KRW), which will offset the decrease in asset tax revenues.

Furthermore, due to the increase in publicly announced property prices, comprehensive real estate tax revenue is expected to rise by 29.6% (1.5162 trillion KRW) from this year's forecast of 5.1138 trillion KRW to 6.63 trillion KRW. With the full implementation of the 2022 property price standardization, comprehensive real estate tax revenue is expected to increase further. A Ministry of Economy and Finance official stated, "If the fair market value ratio is raised to 100%, the level of taxes to be imposed will naturally increase."

On the other hand, asset tax revenues such as capital gains tax and securities transaction tax are expected to decline due to stabilization in the asset market. This is based on forecasts that real estate transaction volumes will decrease and the stock market will cool down compared to this year.

Capital gains tax revenue is expected to be 22.438 trillion KRW, down 11.9% compared to the second supplementary budget forecast. Securities transaction tax is also expected to decrease by 9.0% to 7.538 trillion KRW compared to the second supplementary budget forecast.

Inheritance and gift tax revenue is projected to increase by 1.1962 trillion KRW. Individual consumption tax and customs duties are expected to rise by 138.5 billion KRW and 110.8 billion KRW, respectively. In special accounts, rural special tax will increase by 288.7 billion KRW, and liquor tax by 144.8 billion KRW.

Tax Revenue Increase Immediately After Crisis... Tax Revenue Growth Rate Reached 22% After Global Financial Crisis

Meanwhile, the government drew a line against overly optimistic tax revenue forecasts raised by some quarters. Although uncertainty in revenue conditions is increasing, it analyzed that tax revenue growth rates have generally been higher than nominal growth rates immediately after crises. Ko Gwanghyo, Director General of Tax Policy at the Ministry of Economy and Finance, said, "There is still uncertainty next year," but added, "This year's economic recovery is becoming visible, and next year this trend is expected to be fully reflected in tax revenues." He also said, "After a crisis, as the economy recovers, tax revenue growth rates tend to be significantly higher than nominal growth rates."

In fact, tax revenue growth rates reached 11.0% and 22% in 1999 and 2000, respectively, immediately after the 1997 IMF (International Monetary Fund) crisis. After the global financial crisis, tax revenue growth rates were 8.0% and 8.3% in 2010 and 2011, respectively.

In this regard, experts analyze that national tax revenue will exceed government forecasts and that asset tax revenues will continue to increase. Professor Park Kibek of the Department of Taxation at the University of Seoul said, "The strong export performance this year will influence the increase in corporate tax next year," and added, "The government tends to underestimate forecasts, so actual revenues are expected to be higher than government estimates." Regarding the forecasted decrease in capital gains tax, he analyzed, "Since real estate prices are already at very high levels, even if transaction volumes decrease, tax revenues are likely to be collected at similar levels."

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