This Year’s National Tax Reduction Amount Nears 70 Trillion Won, 'Record High'... Increased by 5.8 Trillion Won in One Year

Ministry of Economy and Finance Announces 'Basic Plan for Tax Expenditures'

This year, the national tax reductions granted by the government are expected to reach a record high of nearly 70 trillion won.

According to the "2023 Basic Plan for Tax Expenditure," approved at the Cabinet meeting on the 28th, the amount of national tax reductions this year is estimated at 69.3 trillion won, an increase of 5.8 trillion won (9.1%) compared to last year (63.5 trillion won, estimated).

Tax expenditure refers to the reduction of taxes that the government should collect to achieve policy goals, which effectively functions as actual fiscal spending. The Ministry of Economy and Finance stated that the increase in national tax reductions this year is to enhance economic vitality and strengthen tax support for public livelihood stability. The total national tax revenue this year is projected to be 428.6 trillion won, up 7.4 trillion won from 421.2 trillion won last year.

Last year, the national tax reduction rate was estimated at around 13.1%, slightly down from the 2021 figure (13.5%). This is analyzed to be due to a 57 trillion won increase in national tax revenue compared to the previous year and a slowdown in the growth of national tax reductions through the adjustment of tax exemptions and reductions. However, this year, with plans to expand tax credits for investments in national strategic technology facilities such as semiconductors, the national tax reduction rate is expected to rise again to 13.9%. The national tax reduction rate refers to the proportion of the national tax reduction amount to the sum of national tax reductions and national tax revenue.

The beneficiaries of this year's tax reductions are projected to be individuals with 43.3 trillion won and corporations with 25.4 trillion won. Among the individual tax reductions, 68.8% are for middle- and low-income earners, while the high-income group accounts for 31.2%. A government official explained the operating conditions of tax expenditure, saying, "While globally high inflation levels persist, the real economy is being impacted due to rapid interest rate hikes in major countries," and added, "Strict management of tax expenditure is necessary to enhance the medium- to long-term sustainability of fiscal resources in preparation for increased fiscal demands such as responding to demographic changes."

The Ministry of Economy and Finance plans to operate this year's tax expenditure focusing on boosting economic vitality and stabilizing public livelihood, while continuing efforts to comply with the national tax reduction limit and thoroughly implementing performance evaluations. Tax exemption and reduction systems with sunset clauses are, in principle, to be terminated or reconsidered for redesign. The Ministry will notify each ministry of the basic tax expenditure plan by the end of this month and receive tax expenditure evaluation reports and proposals from each ministry by the end of April, then reflect them in the 2023 tax law amendment bill after inter-ministerial consultations.

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