Excess Tax Revenue 50 Trillion vs 10 Trillion... Rising Conflict Between Party and Government

Ruling Party "Intentional Underestimation"... Uses 'National Audit' Card to Pressure
Ministry of Economy and Finance "Tax Revenue Expected to Slow in Q4"

[Asia Economy Reporters Son Seon-hee (Sejong), Oh Ju-yeon] This year, tax revenues up to September have exceeded those of the same period last year by more than 59 trillion won, intensifying the ruling party's offensive. Pressure on the government is expected to increase, signaling a potential escalation in ruling party-government conflicts. The ruling party claims that this year's excess tax revenue will reach 50 trillion won and has pressured the Ministry of Economy and Finance by holding it accountable for failing to properly estimate this, even bringing out the 'state audit' card. On the other hand, the government counters that, excluding the portion already included in the second supplementary budget, the excess tax revenue for the year will be limited to the '10 trillion won range.'

On the 16th, Yoon Ho-jung, floor leader of the Democratic Party of Korea, said on a radio program, "This year's excess tax revenue is expected to be about 50 trillion won, which is 19 trillion won more than the 31 trillion won initially forecast by the government in July." He strongly criticized the government, which had been reluctant to provide universal support payments citing fiscal burden, saying, "If the excess tax revenue was intentionally underestimated, it is a matter for a state audit." He added, "I wonder if there has ever been such a serious discrepancy in statistics while managing national finances," and strongly criticized, "If the excess tax revenue is 50 trillion won, it means nearly 15% of the total tax revenue is miscalculated, and the Ministry of Economy and Finance must be held accountable."

In particular, Yoon targeted Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, saying, "The budget authorities and tax authorities failed to anticipate the excess tax collection and did not prepare sufficient expenditure budgets, and also excessively issued national bonds. These are matters for which they must apologize to the public," raising his voice.

However, the government's explanation regarding the 'excess tax revenue' differs. According to the 'Fiscal Trend' report released by the Ministry of Economy and Finance on the same day, national tax revenue from January to September this year was 274.5 trillion won, an increase of 59.8 trillion won compared to the same period last year. However, this increase is simply due to the physical rise in tax revenue compared to last year, which was severely impacted by the COVID-19 pandemic, and does not represent excess tax revenue beyond this year's tax revenue forecast.

The government had initially projected national tax revenue of 282.8 trillion won when preparing last year's budget, but after receiving more tax revenue than expected this year, it revised the forecast to 314.3 trillion won during the second supplementary budget in July. This upward adjustment of 31.5 trillion won was reflected as a revenue revision. Based on this, the current tax revenue progress rate stands at about 87.3%. Since the progress rate has not exceeded 100%, no excess tax revenue has occurred up to September.

Of course, there is no disagreement that excess tax revenue will occur on an annual basis once fourth-quarter tax revenues are included. However, there is a significant difference in perception between the ruling party and the government regarding the scale. Ahead of the presidential election in March next year, the ruling party, which is pushing for universal quarantine support payments, is optimistic about tax revenue and demands funding, while the Ministry of Economy and Finance expects a significant slowdown in tax revenue growth after October.

In particular, last year, when the COVID-19 situation was severe, the government postponed the payment of comprehensive income tax (about 3 to 4 trillion won) originally due in May to October, and deferred some value-added tax payments (about 2.6 trillion won) due in October this year to next year. Considering this, October tax revenue may decrease compared to last year.

Choi Young-jeon, head of the Tax Analysis Division at the Ministry of Economy and Finance, said, "After October, the volume of asset market transactions is expected to decrease, and due to stabilization in asset markets (such as real estate) and tax support effects for small business owners and SMEs, the improvement in tax revenue is expected to slow down."

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