Will Persistent Tax Revenue Estimation Errors Finally Be Rooted Out?

Additional Tax Revenue Re-Estimations Planned for September and November
Supplementary Budget and Unused Funds to Be Discussed with National Assembly in Case of Major Shortfall
Board of Audit and Inspection to Conduct Tax Revenue Estimation Audit in the Second Half of the Year

The National Assembly and the government are preparing comprehensive measures to address the issue of "tax revenue estimation failure," which triggered a large-scale tax revenue shortfall. Unlike in the past, the government is now conducting tax revenue re-estimations even during the budget review process, and the Board of Audit and Inspection has also decided to audit the Ministry of Economy and Finance’s failure in tax revenue estimation.

According to political sources on August 28, the National Assembly's Special Committee on Budget and Accounts focused on the tax revenue estimation failure during its review of the "2024 fiscal year settlement." Assemblyman Ahn Dogeol of the Democratic Party of Korea pointed out, "The tax revenue shortfall attributable to the previous administration from 2023 to this year amounts to nearly 97.5 trillion won." The issue of tax revenue shortfalls, where less tax is collected than initially expected, has recurred over the past three years, including this year.

In response, the government implemented a revenue adjustment this year. In contrast, the previous administration addressed the issue by utilizing funds or leaving budget surpluses instead of adjusting revenue estimates. As a result, local government finances and education-related budgets suffered, with reductions in local allocation tax and local education financial grants received from the central government. Furthermore, fiscal policy was also affected, as planned fiscal expenditures were left unused to match the insufficient tax revenue, leading to challenges in responding to economic conditions.

On the 27th, the 2024 fiscal year settlement for economic departments is being conducted at the National Assembly's Special Committee on Budget and Accounts. 2025.8.27 Photo by Kim Hyunmin

Regarding this, Deputy Prime Minister and Minister of Economy and Finance Koo Yooncheol stated during a response to questions from Assemblywoman Lim Miae of the Democratic Party on the 26th, "There has been a lot of controversy over tax revenue estimation, so we are working to improve the system significantly. We plan to re-estimate tax revenue in September and then conduct another estimation in November."

In addition, the Ministry of Economy and Finance explained that if a large-scale tax revenue shortfall occurs, it will immediately address the issue by preparing a supplementary budget, and if unused budget funds exceed 6 to 7 trillion won, it will respond through consultations with the National Assembly.

Measures such as an audit by the Board of Audit and Inspection and the formation of a fact-finding task force within the Ministry of Economy and Finance were also proposed. Choi Jaehae, Chairman of the Board of Audit and Inspection, stated during the committee session, "An audit is scheduled for the second half of the year regarding the tax revenue shortfall issue." In addition, proposals were made in the National Assembly to form a fact-finding task force within the Ministry of Economy and Finance, to which Deputy Prime Minister Koo replied, "We will make a decision after reviewing the results of the Board of Audit and Inspection’s audit."

Lee Sangmin, Senior Research Fellow at the Korea Institute of Public Finance, said, "To improve the accuracy of tax revenue estimation models, it is necessary to make the models public for private sector review, and to adopt a rolling forecast approach, which involves collecting corporate tax performance data and reflecting it in the budget for re-estimation."

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