Tax collection up in year’s first halfNearly 93.7 trillion won ($81.2 billion) in taxes has been collected in the first five months of this year, 6 trillion more than during the same period last year.
Still, many are worried that it won’t be enough to avoid the same tax shortfall that has continued for the last three years, as many businesses were hit hard by the Middle East respiratory syndrome (MERS) outbreak last month.
According to the Ministry of Strategy and Finance on Tuesday, more taxes were collected in the first five months of this year than last year largely due to increases in corporate and income taxes.
As a result, the tax collection rate was 42.4 percent of the government’s target for the year, 1.9 percentage points higher than last year’s 40.5 percent during the same period.
According to the Finance Ministry’s January-May report, 21.6 trillion won in corporate taxes were collected, 2.2 trillion won more than the same period last year. Corporate tax collections were 46.8 percent of the government’s target for the year, 4.8 percentage points higher than last year during the same period.
Income tax collections also grew. By May, 24.6 trillion won in income taxes were collected, 2.2 trillion won more than the same period last year and nearly 43 percent of the government’s goal for this year. The increase has largely been attributed to the recovery of the real estate market, due to various government deregulations and the lowering of the policy rate by the central bank.
The stock market’s rally has also been cited as having helped increase income tax. The Finance Ministry said 1.5 trillion won in taxes have been collected from stock exchanges, a 36.3 percent increase from last year’s 400 billion won in the same period.
The main Seoul bourse Kospi grew nearly 10 percent at the end of May compared to the beginning of the year, from 1,926.44 on Jan. 2 to 2,114.8 on May 29.
During the same period, the secondary Kosdaq saw a sharper increase, surging more than 28 percent from 553.73 at the beginning of the year to 711.39 by the end of May.
The government also saw a sharp increase in the individual consumption tax, which is slapped on luxury goods and products considered preferable only to certain consumers, such as cigarettes and alcohol.
Collections in the first five months grew nearly 30 percent, from 700 billion won last year to 3.1 trillion won, largely thanks to the tax hike on cigarettes.
The only area that saw a decline in tax collection year-on-year was the value-added tax.
Nearly 23.1 trillion won in value-added taxes were collected, 900 billion won less than the same period last year.
The Finance Ministry estimated that this was largely due to drops in imports and weak consumption.
However, the government is still concerned that tax collections could be seriously affected by MERS’s impact on the economy.
“The value-added tax collection is seeing an additional fall as spending has been shrinking,” said a Finance Ministry official. “Even the individual consumption tax slapped on luxury goods is expected to fall.”
The government anticipates a shortfall of 5.6 trillion won this year.
BY LEE HO-JEONG [firstname.lastname@example.org]
More in Finance
Color of Chuseok
Kospi tumbles to 7-week low as economic prospects dim
BC Card opens big data lab in Busan
Bank of Korea expands support for small businesses
Kakao Bank to start preparing to go public