Government Faces 'Unprecedented' 61 Trillion Won Tax Revenue Error... Failure to Predict Real Estate Market

Hannam-dong Redevelopment Area_Real Estate Reference Photo / Photo by Hyunmin Kim kimhyun81@

[Asia Economy Sejong=Reporter Kim Hyewon] The tax revenue variance compared to the original budget exceeded 61 trillion won last year, marking the largest scale ever. The record-breaking tax revenue variance was due to the economy showing signs of recovery, with exports and imports reaching all-time highs, as well as a continued boom in asset markets such as real estate and the stock market, resulting in more tax revenue than expected. Political pressure on the financial authorities, who have been struggling with the scale of supplementary budget increases since the beginning of the year, is expected to intensify.

The government closed the total revenue and total expenditure accounts for the 2021 fiscal year on the 11th, which finalizes the government's revenue and expenditure for the previous year. ▶Related article on page 5

The finalized total revenue was 524.2 trillion won, and total expenditure was 496.9 trillion won. The surplus on the settlement was 27.3 trillion won, and after deducting 4 trillion won carried forward, the total fiscal surplus was 23.3 trillion won (18 trillion won in the general account and 5.3 trillion won in the special account).

Total revenue increased by 58.7 trillion won from the previous year, collecting 524.2 trillion won. Total expenditure was 496.9 trillion won, which is 97.6% of the budget amount of 509.2 trillion won, an increase of 43.1 trillion won compared to the previous year.

The much-anticipated national tax revenue was finally tallied at 344.0782 trillion won, an increase of 58.532 trillion won (20.5%) from the previous year. Compared to the original budget of 282.8174 trillion won set by the government last year, 61.2608 trillion won more was collected. Compared to the second supplementary budget, about 30 trillion won more was collected. The tax revenue variance rate compared to the original budget was 21.7%, and 9.5% based on the supplementary budget.

By tax category, capital gains tax exceeded the original budget by 20 trillion won, and corporate tax by 17 trillion won. This was due to the real estate market performing better than expected and a sharp economic recovery. With the largest scale of excess tax revenue ever, the fiscal surplus also set a new record. The available supplementary budget resource from the excess tax revenue compared to the second supplementary budget is estimated to be about 3.4 trillion won.

The government stated, "There was an error in the economic indicator forecasts used for tax revenue estimation due to a faster and stronger economic recovery and factors in the real estate market than expected." It also acknowledged, "Although the upward trend in real estate-related tax revenue has slowed, it differed from the government's expectation that the market would stabilize after the supplementary budget."

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