2.2 Trillion Won Shortfall in This Year's Tax Revenue Compared to Supplementary Budget... 3.3% Error Rate from Original Budget

Announcement of 2025 National Tax Revenue Re-estimate
This Year: 369.9 Trillion Won... 0.6% Error Compared to Supplementary Budget
Average Error Rate of 4.8% from 2011 to 2020
Larger VAT and Customs Duty Errors Due to Exchange Rate
Impact from

The government has revised its estimate of this year’s national tax revenue and now expects a shortfall of 2.2 trillion won compared to the supplementary budget (372.1 trillion won) announced in June. The margin of error is 0.6%, which is not high compared to previous years. However, following significant revenue shortfalls in 2023 and 2024, there is a growing possibility of a tax revenue deficit for the third consecutive year. When including the tax revenue revision (10.3 trillion won) at the time of the supplementary budget and comparing it to the original budget, the tax revenue error amounts to 12.5 trillion won, resulting in an error rate of 3.3%.

The Ministry of Economy and Finance shared this outlook on September 25 during a meeting of the Tax Revenue Budget Innovation Task Force, chaired by First Vice Minister Lee Hyungil. The meeting was attended by officials from the Tax Policy Bureau, Budget Bureau, Treasury Bureau, and Policy Bureau within the ministry. They reviewed the current tax revenue conditions and discussed possible improvements to the tax revenue budget.

0.6% Error Compared to Supplementary Budget... Government Says "Relatively Low"

After the revision, this year’s national tax revenue is projected at 369.9 trillion won. This is 2.2 trillion won less than the revenue forecasted in the supplementary budget in June, resulting in an error rate of 0.6%. Compared to other years with supplementary budgets, this is lower or similar to the 2013 (4.0%) and 2022 (0.2%) shortfalls. It is also lower than years when revenue exceeded the supplementary budget, such as 2015 (1.0%), 2016 (4.2%), 2017 (5.7%), and 2020 (2.1%), and much lower than the large error recorded in 2021 (9.5%).

The error rate compared to the original budget is 3.3%. This figure reflects the total shortfall of 12.5 trillion won, calculated by adding the 2.2 trillion won shortfall compared to the supplementary budget and the 10.3 trillion won reduction in revenue estimates made during the supplementary budget revision. This is lower than the error rates in 2023 (14.1%) and last year (8.4%), as well as in 2013 (6.7%) and 2014 (5.1%). However, it is higher than in 2011 (2.5%), 2012 (1.3%), 2015 (1.5%), 2019 (0.5%), and 2020 (2.2%).

An official from the Ministry of Economy and Finance explained, "The 0.6% error rate compared to the supplementary budget is quite low relative to other years, and even compared to the original budget, it is 3.3%." The official added, "Excluding the years with large revenue errors (2021-2024), the average error rate over the past ten years (2011-2020) was 4.8%." Regarding the 2.2 trillion won shortfall compared to the supplementary budget, the official said, "There is typically an unspent balance of 6 to 7 trillion won in the budget, and this year, we expect the unspent funds to fully cover the shortfall."

Tax Revenue Shortfall Due to VAT, Customs Duties, etc... Possibility of Another Revision in November

The revised estimate shows that the shortfall in national tax revenue compared to the supplementary budget is due to several factors: a decrease in value-added tax and customs duties resulting from a drop in the exchange rate; an extension of the flexible tax rate reduction on fuel taxes to ease the public’s fuel cost burden; and a reduction in tax revenue due to increased income tax refunds for small-scale personal service providers such as delivery riders. In particular, the average exchange rate fell from 1,439 won per dollar between January and May to 1,379 won from June to August, a 4.2% decrease, which contributed to the revenue fluctuation. The extension of the fuel tax reduction also affected tax revenue.

Among the three major tax categories, income tax is expected to reach 128.4 trillion won, which is 1.5 trillion won higher than the supplementary budget estimate. Labor income tax (67.5 trillion won) is expected to increase by 2.8 trillion won due to expanded performance bonuses, and capital gains tax (19.6 trillion won) is projected to rise by 200 billion won due to increased income from overseas stocks. However, comprehensive income tax (20.9 trillion won) is expected to decrease by 1.1 trillion won, with an anticipated error rate of 5.0%. This is due to a downward revision of the nominal growth rate forecast, the finalized comprehensive income tax performance at the end of June (which made it difficult to reflect in the supplementary budget), and an increase in income tax refunds for low-income earners (200 billion won).

Value-added tax is projected at 80.9 trillion won, down by 2.4 trillion won from the supplementary budget due to a decline in import-related VAT caused by the lower exchange rate. The error rate is 2.9%. Corporate tax (83.6 trillion won) is expected to increase by 100 billion won compared to the supplementary budget, resulting in an error rate of 0.1% due to improved corporate performance.

In addition, transportation tax, which is affected by the reduction in the flexible tax rate on fuel, is expected to be 13.1 trillion won, 900 billion won less than the supplementary budget. Customs duties (7.4 trillion won) are expected to be 1 trillion won short, resulting in an error rate of 12.0%. Securities transaction tax (3.1 trillion won) is expected to decrease by 700 billion won, with an error rate of 18.4%, due to a decline in Kosdaq trading volume and the implementation of last year’s tax rate cut this year.

Meanwhile, the government is planning an additional revision of next year’s tax revenue estimates within this year. Deputy Prime Minister and Minister of Economy and Finance Koo Yooncheol stated in the National Assembly last month, "We plan to revise the tax revenue estimate in September and review it once again in November." A ministry official added, "If there are significant changes following discussions in the Tax Subcommittee of the National Assembly’s Strategy and Finance Committee, another revision may be necessary," and "If a revision is made, the details will be available during the review of next year’s budget by the National Assembly’s Special Committee on Budget and Accounts in November."

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