Sharp Slowdown in Increase of Household Numbers... Government Says "Real Estate and Stock Transactions Will Reflect with a Time Lag" (Comprehensive)

Ministry of Economy and Finance Publishes October Issue of Monthly Fiscal Trends and Issues

Tax Support Base Effect Disappears, July 6.3 Trillion KRW → August 0.6 Trillion KRW 'Sharp Decline'

[Sejong=Asia Economy Reporter Kim Hyunjung] As the government's tax support base effect disappears, the increase in national tax revenue in August shrank to the lowest level this year. The government also forecasted that the recent slowdown in asset transactions such as real estate and stocks will be reflected in future tax revenues with a time lag.

According to the October issue of the 'Monthly Fiscal Trends and Issues' published by the Ministry of Economy and Finance on the 12th, cumulative tax revenue up to August reached 397.5 trillion KRW, an increase of 79.7 trillion KRW compared to the previous year. Among this, national tax revenue amounted to 248.2 trillion KRW, which is 55.7 trillion KRW more than the previous year. The progress rate from January to August (ratio of revenue to annual target) was 79.0%, 11.6 percentage points higher than the same period last year. Fund revenue from January to August (129.7 trillion KRW) increased by 22.1 trillion KRW, largely due to a 14.9 trillion KRW increase in asset management income of the National Pension Service compared to a year ago.

◆ July 6.3 Trillion KRW → August 0.6 Trillion KRW 'Sharp Decline' = Looking at monthly figures, the increase in tax revenue compared to the previous year fell to the lowest level this year. Monthly tax revenue increases were 2.4 trillion KRW in January, 8.7 trillion KRW in February, 7.9 trillion KRW in March, 13.8 trillion KRW in April, 10.8 trillion KRW in May, 5.2 trillion KRW in June, and 6.3 trillion KRW in July, but in August it dropped to 600 billion KRW, about 10% of the previous month.

This is due to the disappearance of the tax support base effect and a slight slowdown in asset-related tax revenue growth. Excluding the base effect of 7.7 trillion KRW caused by last year's tax support, national tax revenue from January to August increased by 48 trillion KRW this year. Regarding the tax support base effect, Choi Young-jeon, head of the Tax Analysis Division at the Ministry of Economy and Finance, explained, "In August last year, a large amount of comprehensive income tax payments postponed due to COVID-19 in May were received, so the increase in revenue in August this year compared to the previous year significantly decreased."

By tax category, influenced by economic recovery, corporate tax collected in August alone was 13.2 trillion KRW (54.9 trillion KRW from January to August), an increase of 2.2 trillion KRW compared to the previous year, but income tax collected was 7.8 trillion KRW (79.6 trillion KRW from January to August), a decrease of 1.6 trillion KRW from the previous year. The Ministry of Economy and Finance explained that real estate capital gains tax increased by 500 billion KRW and stock capital gains tax by about 700 billion KRW compared to last year. On a cumulative basis, capital gains tax was 10.3 trillion KRW, securities transaction tax was 2.2 trillion KRW, and special fisheries tax was 2.3 trillion KRW, with total asset tax revenue increasing by 17 trillion KRW compared to a year ago.

Non-tax revenue from January to August this year (19.5 trillion KRW) showed a progress rate 1.1 percentage points higher than the same period last year. This was influenced by an increase in current transfer income (2 trillion KRW), including a 100 billion KRW increase in energy special account charges due to increased crude oil imports from expanded factory operation rates.

Meanwhile, although the increase has slowed, steady revenue growth has continued to improve the fiscal deficit. As of the end of August, the integrated fiscal balance recorded a deficit of 29.8 trillion KRW, a reduction of 41.1 trillion KRW compared to the same period last year. The management fiscal balance excluding social security fund balance (40.4 trillion KRW) also recorded a deficit of 70.2 trillion KRW, improving by 25.8 trillion KRW from last year. National debt stood at 927.2 trillion KRW.

◆ Increasing 'Uncertainty' in Future Tax Revenue Conditions... Asset Tax Revenue Fluctuations Key = The government viewed the future tax revenue environment as one where 'uncertainty persists' rather than emphasizing specific upward or downward factors.

Park Cheol-geon, head of Fiscal Soundness at the Ministry of Economy and Finance, diagnosed, "Uncertainty in tax revenue persists due to asset market stabilization and strengthened social distancing measures amid COVID-19 resurgence," and Choi Young-jeon, head of the Tax Analysis Division, forecasted, "Tax revenue increases due to economic recovery seem likely to continue, but overall asset tax revenue shows mixed positive and negative factors, so trends need to be monitored." He added, "The growth trend in real estate and stock transactions is considerably slowing down, and this will eventually be reflected in tax revenue with a time lag."

In fact, stock trading volume and securities transaction amounts show signs of slowing growth. From December last year to June this year, securities transaction amounts surged 80.9% year-on-year to 4,413 trillion KRW, but in July the increase slowed to 5.6%, amounting to 579.6 trillion KRW. In August, it declined 7.0% compared to last year, totaling 576.7 trillion KRW.

Monthly housing sales transactions also peaked at 102,109 units in March, then decreased to 93,068 units in April and 97,524 units in May, and have remained around 80,000 units since June.

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