Tax collection year starts off high

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Tax collection year starts off high

Tax collection for the first month of the year has started strong although there are doubts it will continue for the rest of the year as many economic indicators look less positive.

The Ministry of Strategy and Finance said Thursday it collected 30.1 trillion won ($25 billion) in taxes in January, mainly due to an active real estate market and hiring in the last quarter of last year. That is a 17 percent increase, or 4.4 trillion won, more than the 25.7 trillion won collected on the same month a year ago.

The increased collection has helped raise the progress rate of this year’s target to 13.5 percent, 1.6 percentage points higher than 11.9 percent a year ago. The government has set this year’ tax collection goal at 222.9 trillion won.

Income tax contributed the most as it grew 26 percent, the sharpest among all other taxes collected including corporate tax, transport tax and even customs. By amount it was the second largest after value added tax.

“Active real estate transaction that help bring in more capital gains tax, that are levied on profits made from the sales, as well as increase in employment, contributed to the 1.5 trillion won additional tax collected compared to a year ago,” said a Finance Ministry official.

“Additionally, the improved consumer spending [resulting from the so-called Korea Black Friday] also helped expand the value-added tax collection by 600 billion won.”

The government was also able to bring in 700 billion won more in corporate taxes at 1.5 trillion won.

However, there is concern that the positive momentum may not continue as down risk factors are increasing.

Last year the Korean government was able to end the fiscal shortfall that started in 2012 as it collected 12.4 trillion won more than the previous year to 217.9 trillion won. This was 2.2 trillion won more than its estimate of 215.7 trillion won it made when it was setting up for the supplementary budget.

However, the situation has rapidly turned unfavorable, particularly in the stock market that has been struggling since the beginning of the year due to external factors such as the rapidly decelerating Chinese economy, the growing geopolitical situation on the Peninsula and the interest hike move by the U.S.

The Korean Finance Ministry said it would closely monitor the current situation as worsening consumer confidence has been heavily affected by external factors.

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