"Need to Recalculate Next Year's National Tax Revenue"…Growing Concerns Over Increasing National Budget Deficit

The government is facing increasing calls to revise its forecast for next year's national tax revenue. As major international organizations have downgraded South Korea's economic growth rate for next year due to prolonged tightening effects, there are suggestions that the government should adjust the national tax revenue forecast it announced in August this year.

According to the report titled "Causes of Tax Revenue Deviations and 2024 National Tax Revenue Forecast" released by the National Assembly Budget Office on the 23rd, next year's national tax revenue is expected to be 361.4 trillion won, which is 6 trillion won less than the government's earlier forecast of 367.4 trillion won. The Budget Office anticipates that due to a decline in corporate operating performance and a sluggish recovery in the real estate market, the government's tax revenue forecast will fall short.

Specifically, the Budget Office estimates additional decreases compared to the government's forecast for next year: 2.7 trillion won in corporate tax, 1.3 trillion won in capital gains tax, and 300 billion won in value-added tax. While the decline in corporate operating performance in the second half of this year is expected to slow down, the Budget Office projects that poor performance due to falling semiconductor prices will continue through the first half of next year. The real estate market is also analyzed to face difficulties in recovering transaction volumes and prices for the time being, as loan demand is constrained by high interest rates.

Accordingly, the current growth rate for next year is expected to be 4.2%, which is 0.7 percentage points lower than the government's forecast, and the real growth rate is also projected to decrease by 0.4 percentage points to 2.0%. The customs-cleared export growth rate is predicted to decline by 1.6 percentage points to 7.2%, while the customs-cleared import growth rate is expected to increase by 2.7 percentage points to 5.7%. The Budget Office recommended that policies be prepared to address potential tax revenue shortfalls considering the downward risks to the economy next year.

Requests to review the tax revenue reforecast have also been raised by the National Assembly's Special Committee on Budget and Accounts. Earlier, the committee stated in its "Review Report on the 2024 Budget and Fund Operation Plan" that the appropriateness of next year's national tax revenue forecast should be examined. They noted that external uncertainties have increased just four months after the government's forecast, which could lead to lower tax revenue collection. The committee pointed out, "External uncertainties such as the Israel-Palestine war have emerged as factors causing macroeconomic fluctuations, necessitating a review of real growth rates and inflation."

If the tax revenue shortfall expands through next year, local governments could face significant damage immediately. This concern arises from the fact that local allocation tax revenues have sharply decreased this year due to tax revenue shortages, and that shortages in major local tax items such as comprehensive real estate tax and property tax could continue into next year.

However, the government maintains a cautious stance regarding the need to reforecast tax revenue for next year. It explains that there have been no major changes in external economic conditions warranting a new forecast since the announcement of next year's tax revenue projections.

Experts say that if the government reforecasts tax revenue, it could improve the accuracy of predictions by reflecting recent economic conditions. Professor Sung Tae-yoon of Yonsei University's Department of Economics stated, "In the case of tax revenue reforecasting, it is meaningful to check whether the current economic situation could be an additional factor for change, rather than presuming in advance that tax revenue will inevitably decrease."

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