Report warns gov’t on tax revenue

Considering the expanding welfare budget and the worsening sovereign debt situation, the government should tighten its management on tax collection, the Korea Development Institute warned in a report released yesterday.

Tax cuts and reduced revenue from taxes in general may negatively impact the nation’s fiscal soundness in the future, it said.

Spending in budget categories that was cut in the wake of the global financial crisis has again picked up as part of efforts to spur a sustained recovery.

The number of categories with net spending shrunk from 230 in 2006 to 177 in 2010 but jumped back to 201 last year. This year, the government has planned on net spending in 205 categories.

Government spending of tax revenue between 2006 and 2011 increased 7.5 percent each year on average, which is higher than the 6.9 percent average rise in tax revenue.

In total, the 29 trillion won ($25.1 billion) in tax spending for 2010 grew to an estimated 30.6 trillion won last year. It is expected to reach nearly 32 trillion won by the end of this year.

“Categories with tax cuts or exemptions are expanding, such as in workers’ income and temporary investments,” said Yoo Han-wook, KDI researcher.

By Lee Ho-jeong [ojlee82@joongang.co.kr]