Government to Cut 77 Trillion Won in National Taxes This Year... Ineffective Tax Expenditures to Be Reorganized

Approval of the '2024 Basic Plan for Tax Expenditures'

As tax support to recover from the economic recession increases, the amount of national taxes reduced by the government this year is expected to exceed 77 trillion won. The government plans to refrain from establishing unnecessary and non-urgent systems and actively reorganize tax expenditures that lack effectiveness.

On the 26th, the Ministry of Economy and Finance announced that the '2024 Basic Plan for Tax Expenditure,' containing these details, was approved at the Cabinet meeting. Tax expenditure refers to the taxes that the government refrains from collecting to achieve policy goals, producing effects similar to fiscal spending. The Ministry of Economy and Finance projects this year's national tax reduction amount to be 77.1 trillion won, the largest ever. The total national tax revenue is expected to increase by 7% from last year (369.1 trillion won) to 394.9 trillion won.

The proportion of tax reductions to the total national tax revenue plus tax reductions, totaling 472 trillion won, is estimated at 16.3%. This exceeds the legal limit for national tax reductions under the National Finance Act (the average national tax reduction rate over the previous three years plus 0.5 percentage points), which is 14.6%. Under the Yoon Seok-yeol administration, the national tax reduction rate is expected to exceed the legal limit for two consecutive years, last year and this year.

Choi Sang-mok, Deputy Prime Minister for Economic Affairs and Minister of Economy and Finance, is attending the Emergency Economic Ministers' Meeting held at the Government Seoul Office in Jongno-gu, Seoul on the 14th, making remarks related to housing, semiconductors, and other topics. Photo by Jo Yong-jun jun21@

To comply with the tax expenditure reduction limit, the government stated it will refrain from establishing unnecessary and non-urgent systems and terminate programs that fall short of their goals. It will also actively reorganize ineffective tax expenditures. The government will conduct performance analyses and prepare improvement plans for seven tax expenditures that are set to expire this year and have annual reduction amounts exceeding 30 billion won. Furthermore, exemptions from preliminary feasibility evaluations for tax expenditures will be limited to cases reviewed by the Cabinet for economic and social responses.

The government has established a broad direction for tax expenditure operations this year to strengthen the innovation ecosystem by increasing tax support. First, tax support for research and development (R&D) and investment will be strengthened to ensure continuous innovation driven by the private sector and the market. Additionally, the scope of national strategic technologies and new growth technologies will be continuously supplemented to maintain the competitiveness of advanced industries and expand the domestic production base.

Support for companies employing youth, women returning to work after career breaks, and people with disabilities will be expanded to enhance social mobility through quality jobs. Listed companies that increase shareholder dividends and actively retire treasury stocks will receive corporate tax reduction benefits, and shareholders of listed companies that increase dividends will also benefit from reduced dividend income tax burdens through a 'Support Plan for Value-Up of Listed Companies.' Measures to reduce tax burdens for companies promoting work-life balance employment culture will also be considered. The Ministry of Economy and Finance plans to receive tax expenditure evaluations and proposals from each ministry by the end of next month, coordinate with ministries, and reflect them in this year's tax law amendment bill.

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