Chu Kyungho: "Tax Shortfall Manageable with Funds... Official Revised Estimate in August"

On May 30, Deputy Prime Minister and Minister of Economy and Finance Chu Kyungho addressed concerns about a tax revenue shortfall and the possibility of an additional supplementary budget. He stated, "Even if the tax revenue situation worsens compared to now, the government has several options to respond, such as utilizing the remaining portion of the world surplus fund and surplus resources from various funds. Therefore, we are capable of responding to the situation."

Speaking with reporters at the Government Complex Sejong that morning, Deputy Prime Minister Chu added, "We will do our utmost to execute the budget passed by the National Assembly this year without incurring additional debt." Although national tax revenue in the first quarter decreased by 24 trillion won compared to the previous year, raising concerns about a revenue shortfall, he once again dismissed the possibility of a supplementary budget in the second half of the year.

Of the 6 trillion won in general account surplus from the 2022 fiscal year’s total revenue and expenditure, the net surplus-excluding allocations for local grants, contributions to the Public Fund Redemption Fund, and government bond repayments-amounts to 2.8 trillion won. Including the 3.1 trillion won in special account surplus, the total available for use is approximately 5.9 trillion won. While the exact amount of surplus resources in various funds has not been disclosed, it is estimated to be several trillion won.

Deputy Prime Minister Chu explained, "The recent shortfall in tax revenue compared to initial expectations is mainly due to corporate tax and capital gains tax related to assets. As corporate earnings are reported and corporate taxes are paid, and depending on the recovery of the real estate and stock markets, the tax revenue situation could deteriorate further. We are therefore reviewing various alternatives with these factors in mind."

As concerns about the tax revenue shortfall grow, the government plans to officially announce a revised tax revenue estimate as early as August. Deputy Prime Minister Chu stated, "If we revise the estimate and announce it every month as new tax revenue figures are released, it could cause confusion. We will aim to provide an official revised estimate to the public in August, or by early September at the latest."

Deputy Prime Minister and Minister of Economy Choo Kyung-ho is attending the External Economic Ministers' Meeting held at the Government Seoul Office in Jongno-gu, Seoul on the 8th, delivering opening remarks. Photo by Yoon Dongju doso7@

Regarding inheritance tax in this year’s tax reform, he commented, "It is premature to say that a definitive plan for inheritance and gift tax reform will be included in this year’s tax reform. More review and in-depth discussion of overseas cases are necessary." He continued, "Last year, we made some changes related to business succession and inheritance tax. This year, we have mentioned reviewing the issue of inheritance tax reform linked to the acquisition-based inheritance tax. Although the first phase of the research project is nearing completion, since this is a socially contentious issue with differing opinions, there is a consensus that more public discussion is needed and that the current level of review is insufficient."

Regarding growing concerns about the reverse jeonse phenomenon, he said, "The government will maintain a consistent policy stance on the stable management of household debt, and is considering partially easing loan regulations in a limited manner to address the difficulties related to loans for jeonse deposit return guarantees." The Ministry of Economy and Finance, along with other relevant ministries, plans to actively discuss measures to resolve the significant confusion and difficulties in the real estate market and the public’s economic life caused by the reverse jeonse situation.

Deputy Prime Minister Chu also explained that the government will decide whether to adjust this year’s economic growth forecast (currently 1.6%) when it announces the economic policy direction for the second half of the year in early July. He stated, "We will fully consider the analyses of various indicators recently released by the International Monetary Fund (IMF), the Bank of Korea, and the Korea Development Institute (KDI), and after further review, we will present our forecast when announcing the economic policy direction for the second half of the year."

Previously, the Bank of Korea and KDI had each revised their forecasts for Korea’s economic growth rate this year, lowering them from 1.6% to 1.4% and from 1.8% to 1.5%, respectively. In line with this, the government is also increasingly likely to lower its growth forecast.

He emphasized that the outlook for a "recovery after a sluggish first half" remains valid. He said, "The Bank of Korea and KDI have both presented much more optimistic growth forecasts for the second half of the year compared to the first half. Taking this into account, the overall economic trend of stronger performance in the second half remains unchanged."

Regarding the possibility of raising the fair market value ratio for the comprehensive real estate holding tax or ending the extension of fuel tax cuts as part of tax normalization measures, he refrained from giving a definitive answer, saying, "We will inform you of our position once we have completed our review of each individual policy."

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