Half of the 61 Trillion Won Increase in Taxes Last Year Came from Real Estate Revenue... Real Estate Taxes Snowball During Moon Government's 5 Years

How Did the 61 Trillion Won Excess Tax Revenue Occur? ... 21.7% Error Rate, Highest in 31 Years
Capital Gains Tax Surges 117% Compared to Original Budget ... Inheritance and Gift Tax Up 65%, Comprehensive Real Estate Tax Up 20%
Pressure to Increase Supplementary Budget Intensifies ... Ministry of Economy and Finance Says "Supplementary Budget Funding from Global Surplus is Only 3.4 Trillion Won"

[Asia Economy Sejong=Reporter Kwon Haeyoung] It has been revealed that nearly half of the over 61 trillion won in additional tax revenue collected compared to last year’s original budget came from real estate-related tax revenues. Despite three revisions to the government’s tax revenue forecasts, the tax revenue error rate reached 21.7%, the highest in 31 years since 1990 (22.5%), putting the government’s inaccurate tax revenue forecasting ability under scrutiny. This is expected to intensify political pressure to increase the supplementary budget (추경). However, according to the Ministry of Economy and Finance, after sequentially using 18 trillion won of the general account surplus out of the record-high “world surplus” (23.3 trillion won) caused by the surge in excess tax revenue for local allocation tax and debt repayment in accordance with the National Finance Act, only 3.4 trillion won will remain available for the supplementary budget.

◆ 27 trillion won of the 61 trillion won 'tax revenue error' came from real estate taxes ＝ According to the “2021 Fiscal Year Total Revenue and Expenditure Closing Results” announced by the Ministry of Economy and Finance on the 11th, total national tax revenue in 2021 was 344.0782 trillion won, an increase of 61.2608 trillion won (21.6%) compared to the original budget (282.8174 trillion won). Nearly half of this increase came from asset-related tax revenues such as capital gains tax, inheritance and gift tax, comprehensive real estate holding tax, and securities transaction tax.

Looking at major tax items, capital gains tax reached 36.7072 trillion won, a sharp increase of 117.3% (19.8215 trillion won) compared to the original budget (16.8857 trillion won) announced in September 2020. Inheritance and gift tax recorded 15.0062 trillion won, securities transaction tax 10.2556 trillion won, and comprehensive real estate holding tax 6.1302 trillion won, exceeding the original budget by 5.9063 trillion won, 5.1695 trillion won, and 1.0164 trillion won respectively. The growth rates were 64.9%, 101.6%, and 19.8%, respectively. Among these, capital gains tax, inheritance and gift tax, and comprehensive real estate holding tax all correspond to tax items increased due to the rapid rise in real estate and other asset prices. These three tax items alone collected 26.7442 trillion won more than the government’s forecast, accounting for 43.6% of the total excess tax revenue. Securities transaction tax also increased significantly due to a boom in stock trading amid a thriving stock market.

The occurrence of a tax revenue error exceeding 10 trillion won, mainly centered on real estate asset taxes, is very unusual. According to the National Assembly Budget Office, since 2000, there have been five instances where excess tax revenue exceeded 10 trillion won compared to the original budget. In 2000, 2007, and 2018, corporate tax accounted for the largest share of excess revenue, while in 2017, value-added tax had a significant impact. In the past, unexpected economic recovery and expanded corporate business performance were major factors.

◆ Real estate tax revenue snowballing over five years of the Moon administration ＝ Ultimately, the main reason for the government’s large tax revenue forecast errors can be attributed to the failure of real estate policies leading to rising housing prices. In 2021, real estate transaction prices rose by 4.2% for land and 9.9% for housing. The publicly announced prices, which serve as the basis for calculating the comprehensive real estate holding tax base, also increased by 10% for land and 16.3% for housing. As asset prices soared, especially for housing, gift transactions increased due to tax burdens, with the number of gift cases rising by 32.4% for housing (80,000 units) and 29.6% for land (196,000 parcels) in the first half of the year.

A Ministry of Economy and Finance official explained, “Last year, amid the COVID-19 crisis, our economy recovered faster than expected. The uncertainty in real estate market forecasts was too great, causing significant errors in the economic indicators used for tax revenue projections.” The official added, “Although the upward trend in real estate-related tax revenue slowed, it differed from the government’s expectation that the market would stabilize after the supplementary budget.”

Due to the failure of real estate policies focused on regulation and supply shortages, combined with liquidity expansion caused by COVID-19, real estate tax revenue under the Moon Jae-in administration increased significantly compared to the previous Park Geun-hye administration. From 2017, when the Moon administration began, to 2021, capital gains tax collected was 109.6 trillion won, inheritance and gift tax 47.8 trillion won, and comprehensive real estate holding tax 16 trillion won. Considering that during the four years of the Park Geun-hye administration (2013?2016), capital gains tax was 40.4 trillion won, inheritance and gift tax 19.3 trillion won, and comprehensive real estate holding tax 5.2 trillion won, tax revenues for each item nearly tripled.

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