Diverging Fiscal Revenue Forecasts... Yejongcheo Predicts "21 Trillion Won Less Revenue Than Government Estimates Over Next 5 Years"

[Asia Economy Sejong=Reporter Son Seon-hee] As economic uncertainty grows, a negative forecast has emerged that national tax revenue, the foundation of the country's finances, could fall short of government expectations by more than 20 trillion won over the next five years.

According to the '2023 and Medium-term National Tax Revenue Outlook' recently published by the National Assembly Budget Office (NABO) on the 3rd, NABO projected this year's national tax revenue at 394.9 trillion won and 453.8 trillion won in 2026, with an average annual growth rate of 3.5%. In contrast, the government's '2022-2026 National Fiscal Management Plan' sets the national tax revenue targets at 396.6 trillion won this year and 459.9 trillion won in 2026, with a higher average annual growth rate of 3.8%. NABO's projections are at least 1.8 trillion won and up to 6.8 trillion won lower than the government's figures each year. Consequently, the total difference in national tax revenue over five years between the two estimates amounts to 21.3 trillion won. In other words, if NABO's forecast holds true, national tax revenue will be more than 20 trillion won less than the government's expectations over the next five years.

Even for this year, which is just over two months away, there is about a 2 trillion won gap between the government's and NABO's national tax revenue forecasts. When the government formulated the second supplementary budget in the first half of the year, it estimated this year's excess tax revenue to reach 53.3 trillion won and adjusted revenue estimates accordingly. This raised the national tax revenue forecast to 396.6 trillion won. Furthermore, when preparing the next year's budget in August, the government revised the national tax revenue forecast again, presenting 397.1 trillion won, which is higher than the supplementary budget estimate. This is the most recent target for this year's national tax revenue announced by the government, exceeding NABO's forecast by 2.2 trillion won.

The difference in national tax revenue forecasts fundamentally stems from differing perceptions of macroeconomic indicators. NABO projected this year's nominal Gross Domestic Product (GDP) growth rate at 4.7%, while the government presented a more optimistic 5.2%. Regarding the tax revenue forecast gap, NABO explained, "The base for the tax revenue forecast, the 2022 national tax revenue, was projected by NABO to be 1.8 trillion won lower than the government's estimate, and differences in tax buoyancy according to nominal GDP growth also influenced the forecast. Looking at the nominal GDP growth trends of NABO and the government from 2023 onward, the growth rate difference is within about 0.1 percentage points."

If, as NABO forecasts, the year-end national tax revenue falls short not only of the government's forecast but also of the supplementary budget already adjusted, fiscal authorities are expected to face significant criticism. This is because a large-scale supplementary budget of 62 trillion won was already spent in May based on the reflected excess tax revenue of 53.3 trillion won.

As economic uncertainty continues to grow, it is increasingly difficult to guarantee that next year's national tax revenue will meet targets. Concerns about an economic recession are mounting, and key tax revenues such as earned income tax and corporate tax, which led this year's tax revenue boom, could fluctuate sharply depending on the employment market and economic conditions next year. Representative asset taxes such as securities transaction tax and capital gains tax have already decreased by nearly 40% compared to last year. The government's national tax revenue target for next year is 400.5 trillion won, about 1 trillion won higher than NABO's forecast of 399.4 trillion won.

The government maintains its stance that the national tax revenue target can be achieved. The Ministry of Economy and Finance stated, "Considering the scale of tax support (9.8 trillion won) since last October, if national tax revenue from October to December this year is collected at the same level as the previous year, the revenue budget for this year can be achieved."

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