Record profits boost tax revenue
The Ministry of Strategy and Finance said Friday that it collected 207.1 trillion won ($186.4 billion) in taxes between January and September. The amount is 18 trillion won more than what was collected in the first nine months of last year, and represents 82.5 percent of this year’s government target, faster than last year’s 81.3 percent.
The biggest contributor has been corporate taxes, which totaled 54 trillion won up to September. The amount is 7.1 trillion won more than what was collected in the first nine months of last year.
Korean companies, particularly tech companies, have been enjoying record earnings largely thanks to rising orders for advanced memory chips as device manufacturers demand more storage space and power for their phones, servers and computers.
Samsung Electronics, Korea’s largest conglomerate, posted record operating profit of 14.5 trillion won during the third quarter, nearly triple the profit from the same quarter last year.
Another major Korean chip manufacturer, SK Hynix, saw operating profit soar fivefold in the third quarter to a record 3.7 trillion won.
Even Hyundai Motor, which has been struggling with slow sales in China and the United States, was able to make an operating profit of 1.2 trillion won, up 12.7 percent from last year, thanks to the introduction of new models.
Such strong performances have contributed to an increase in tax revenue.
“The payment on corporate taxes that is conducted between September and October has increased, which helped raise the amount of corporate taxes collected from a year ago,” said Kim Young-no, a director at the Ministry of Strategy and Finance.
In September alone, the government collected 1.1 trillion won more in corporate taxes than a year ago.
Revenue from income and value-added taxes also saw a significant increase.
In the first nine months of the year, the government collected 54.9 trillion won in income taxes, up 4.5 trillion won from a year ago. The figure represents 78.9 percent of this year’s target, but it falls short of the 79.6 percent progress made during the same time last year.
Value-added tax collection expanded this year by 3.1 trillion won to 49.5 trillion won.
With only a month left in the year, the government estimates that additional taxes collected this year won’t stray too far from the current size. During a hearing at the National Assembly on Monday, Finance Minister Kim Dong-yeon said he expects the government to collect 17 trillion won more in taxes this year than last year.
The amount is expected to rise even further next year as the government has increased tax rates on conglomerates and high-income earners.
In August, the government raised the maximum tax rate for companies that make more than 200 billion won a year to 25 percent from 22 percent.
Those who make more than 500 million won a year will see their tax rate increase to 42 percent from 40 percent. Income of between 300 and 500 million won will be taxed 40 percent, up from 38 percent.
The government estimates that this will contribute to an additional 5.5 trillion won in taxes in the next five years, including 2.6 trillion won from businesses and 2.2 trillion won from individuals.
BY LEE HO-JEONG [firstname.lastname@example.org]