Fourth surplus in a row reported as tax take increases

The government reported its fourth consecutive annual fiscal surplus in 2018 as tax revenue came in above estimates.

It collected 25.4 trillion won ($22.6 billion) more than forecast, a record.

According to the Ministry of Economy and Finance on Friday, Korea’s fiscal surplus in 2018 totaled 16.5 trillion won.

Gross revenue came in at 385 trillion won last year, while spending was 364.5 trillion won. The 4 trillion won difference was the result of Treasury bond redemptions.

When compared to the previous year, gross revenue - which not only includes taxes but also fines and commissions charges - grew 7 percent from 2017’s 359.5 trillion won.

Spending grew 6 percent from 342.9 trillion won the previous year.

When excluding the 3.3 trillion won carried forward from the previous year, the surplus was 13.2 trillion won, larger than the 11.3 trillion won in 2017.

A surplus has been recorded every year since 2015, when a three-year run of deficits was ended.

The ministry cited the strong sales of semiconductors contributing to an increase in the corporate tax take as well as favorable conditions in both the real estate and stock markets, leading to an increase in revenue from capital gains and stock trading taxes.

Last year, the government collected 293.6 trillion won of taxes, up 10 percent from the previous year’s 265.4 trillion won.

The government last year collected 25.4 trillion won more than its initial goal. It has been collecting more than its targets since 2015, when it took 2.2 trillion won more than forecast. The difference was 9.8 trillion won in 2016 and 14.3 trillion won in 2017.

The government has been criticized for its failure to accurately predict its tax revenue. Its overshooting is seen as especially odd as economic growth has been slowing.

The government collected 70.9 trillion won in corporate taxes in 2018. Corporate taxes grew nearly 20 percent when compared to 2017’s 59.2 trillion won. Last year’s corporate tax take was 12.5 percent, or 7.9 trillion won, more than the target of 63 trillion won.

In terms of income tax, the government collected 84.5 trillion won, up 12.5 trillion won from 2017’s 75.1 trillion won. The biggest contributor was the capital gains tax, which grew 19.1 percent from the previous year to 18 trillion won. It was 75.3 percent more than what the government initially forecast.

This sharp rise in the capital gains tax take was largely due to the vibrant real estate market in the first half of the year before the government tightened regulations in September.

The market has since frozen.

The tax collected from stock exchange transactions grew 38.4 percent compared to the previous year to 6.2 trillion won, a full 56.1 percent more than the government’s expectation.

As government estimates on tax collection have been off over the last four years, the Finance Ministry said it will change the way tax estimates are projected.

“There are always unexpected factors when making forecasts on tax collection,” said a ministry official. “Additionally, because we have collected less than our target in the four years prior to 2015, we have had the tendency to predict more conservatively.

Until now, the Finance Ministry has been fully in charge of predicting tax collections. But the Finance Ministry said it is considering forming a tax forecast commission with representatives from the Finance Ministry, the National Tax Service, the Korea Customs Service and the Korea Institute of Public Finance.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]