Gov’t sees budget deficit for February
A monthly report by the Finance Ministry showed that total revenue in February was 18.1 trillion won ($16.6 billion), with expenditures exceeding that at 33.1 trillion won, resulting in 14.9 trillion won deficit.
“Revenue is usually small in the beginning of the year, when taxpayers should pay their year-end taxes, and the government tends to commit to an early execution of the budget, which means the deficit is usually seen early in the year,” a ministry official said by phone.
The report showed that the accumulated value-added tax (VAT) as of February dropped 600 billion won year-on-year due to sagging imports and consumption. Corporate taxes were also down by 300 billion won as of February from the same period in 2014.
The accumulated deficit between January and February ignited concerns that Korea could face a severe fiscal deficit again at the end of this year, just like that in 2014.
According to the report, the accumulated deficit between January and February reached 9.1 trillion won - more than the deficit in the same period last year of 8.2 trillion won.
An increase in revenue has also proven sluggish, on par with that in 2014. As of February, the Korean government had only raised 14.4 percent of total revenue, which was the same amount collected as of February 2014.
The fiscal balance index, the effective total government budget that excludes the balance for various government-paid pensions, also saw a higher deficit year-on-year as of February.
Between January and February 2014, it stood at 12.8 trillion won, while this year recorded 14.2 trillion won.
The Korean government suffered the worst budget deficit in 2014, recording 10.9 trillion. That was more than its 8.6 trillion won in debt in 1998, when the country was hit by the financial crisis.
Up until 2014, the fiscal deficit had continued to rise over three consecutive years, from 2.8 trillion won in 2012 to 8.5 trillion won in 2013 and 10.9 trillion won in 2014.
At the time, the biggest cause in the unprecedented deficit came from less-than-expected tax revenue from the corporate arena: The government collected 3.3 trillion won in taxes than its target amount.
Additionally, the protracted depression in the Korean economy led to diminished consumption, resulting in less VAT. The strengthened won also lowered the price of imported goods, leading to smaller tariffs.
While politicians are debating over whether it would be plausible for the Park Geun-hye administration to maintain its costly welfare programs without raising taxes, economists and assemblymen say the government was too rosy in planning the fiscal budget.
In the latest report by the National Assembly’s Budget Office, the Korean government will see about a 10.7 trillion won deficit, due to less corporate taxes, VAT, tariffs and stock exchange taxes.
BY KIN HEE-JIN [firstname.lastname@example.org]