Ministry of Economy and Finance Changes Excess Tax Revenue Estimate from '10 Trillion Won to 19 Trillion'... "Not an Intentional Underestimation"

Hong Nam-ki, Deputy Prime Minister for Economy and Minister of Strategy and Finance [Image source=Yonhap News]

[Sejong=Asia Economy Reporter Son Sun-hee] The Ministry of Economy and Finance announced on the 16th that the annual excess tax revenue for this year is expected to be around 19 trillion won. Although it had previously stated several times that it would be in the "10 trillion won range," it has belatedly changed its statement to indicate that the excess tax revenue will be close to 20 trillion won, which is expected to spark controversy.

On the 16th, the Ministry of Economy and Finance stated in a press release, "At this point, due to a stronger-than-expected economic recovery and asset market factors following the (second) supplementary budget, excess tax revenue of about 19 trillion won is expected compared to the supplementary budget’s (then national tax revenue forecast) 314.3 trillion won." Earlier that morning, the announcement of the "Fiscal Trend November Issue" showed that national tax revenue up to the third quarter had increased by nearly 60 trillion won compared to last year, reigniting the debate over the scale of excess tax revenue, prompting the ministry to issue an additional explanatory document that was not originally planned.

Previously, during the National Assembly’s audit and the Special Committee on Budget and Accounts, Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki said regarding this year’s excess tax revenue, "It seems it will be a little over (10 trillion won)." Common sense had interpreted this as a scale not significantly exceeding 10 trillion won.

However, according to the fiscal trend released that 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. Of course, this amount represents the physical increase in tax revenue compared to last year, not the "excess tax revenue" relative to the government’s forecast.

The precise meaning of excess tax revenue refers to the difference between the annual revenue budget (supplementary budget) and the actual national tax revenue. When preparing last year’s main budget, the government forecasted this year’s national tax revenue at 282.8 trillion won. However, as much more tax revenue came in during the first half of this year, the government reflected a revenue adjustment of 31.5 trillion won in the second supplementary budget in July, revising the forecast for this year’s national tax revenue to 314.3 trillion won. This was used as funding for programs such as the COVID-19 coexistence support fund.

However, the excess tax revenue announced by the government on this day means that about 19 trillion won more revenue is expected compared to this already increased second supplementary budget. The exact amount of excess tax revenue will be finalized in April next year when the settlement of this year’s actual national tax revenue is completed, but adding the tax revenue already reflected once in the budget, about 50.5 trillion won of excess tax revenue is expected compared to the forecast at the time of the main budget. The Ministry of Economy and Finance stated that it reported this information to President Moon Jae-in last week and explained it to the ruling Democratic Party the day before.

The Ministry of Economy and Finance said, "We have apologized several times for not accurately forecasting tax revenue and for the occurrence of a large amount of excess tax revenue, and we apologize once again." However, it added, "We clearly state that there was no intentional underestimation of tax revenue as some have pointed out, nor was there any such action."

Earlier, Democratic Party floor leader Yoon Ho-jung criticized, "The Ministry of Economy and Finance has claimed to have thoroughly estimated tax revenue until now, but looking at this year’s results, it is very disappointing," adding, "If it is 50 trillion won, that means about 15% of the tax revenue was misestimated. The Ministry of Economy and Finance must take responsibility for this." He further stated, "If there was intent, this would be a matter for a state audit," and scolded, "Even now, Deputy Prime Minister Hong Nam-ki should apologize and reflect to the public."

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