Big tax take boosts prospects for supplementary budget

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Big tax take boosts prospects for supplementary budget

Ko Kwang-hyo, the Finance Ministry's tax and custom official, give a briefing on taxes collected in the first 11 months of 2021 at the government office in Sejong on Thursday.[YONHAP]

Ko Kwang-hyo, the Finance Ministry's tax and custom official, give a briefing on taxes collected in the first 11 months of 2021 at the government office in Sejong on Thursday.[YONHAP]

Tax revenue in the first 11 months of 2021 exceeded estimates, setting the stage for the first supplementary budget of the new year as social distancing restrictions continue to affect small businesses.  
 
According to the Finance Ministry on Thursday, through November, the government collected 323.4 trillion won in taxes. It had originally forecast 314.3 trillion in taxes for all of 2021.
 
"Despite the spread of Covid-19, including Omicron, Korea's strong economic recovery is expected to exceed expectations," said Ko Kwang-hyo, a tax and custom official at the Finance Ministry citing record-breaking trade and an improving employment picture.
 
Ko said the surplus tax for December is likely to be larger than the surplus tax of 17.7 trillion won in December 2020. 
 
With a strong December, the government will likely take in an estimated 27 trillion in excess taxes full-year 2021, breaking an earlier forecast of 19 trillion in excess taxes.
 
The tax take in December is expected to be strong due the comprehensive real estate holding tax. According to the National Tax Service, the comprehensive real estate holding taxes for residential units totaled 5.7 trillion won in 2021, from 1.8 trillion won in 2020.
 
President Moon Jae-in ordered the government to come up with measures to utilize the surplus taxes in support of small shop owners and self-employed struggling under extended restrictions, according to the Blue House on Thursday.  
 
"It is fortunate that we now have room to support small shop owners and self-employed," Moon said.
 
The Democratic Party led by its presidential candidate Lee Jae-myung has been demanding another supplementary budget as the government was able to collect more taxes than expected. The DP has argued that the additional taxes would allow for the support without the need to issue bonds.
 
Despite criticism that the DP is trying to win favor of the public ahead of the March presidential race, the ruling party has been pushing for the extra budget to be created before the Lunar New Year holidays.
 
It would be Korea's seventh supplementary budget since the Covid-19 outbreak started in 2020.    
 
Tax revenue was up across the board, including income and corporate taxes.  
 
Income taxes collected through November totaled 106.6 trillion won, which is 20 trillion won more than in the year-earlier period. The government said the stronger job market helped.
 
Last year, 369,000 more people were employed than in 2020, the biggest increase in seven years.
 
The corporate tax take totaled 68.8 trillion won through November, 14.7 trillion won more on year, while value-added taxes totaled 70.3 trillion won, up 6.2 trillion won.  
 
Custom duties came to 7.6 trillion won, up 1.2 trillion won.  
 
When the four social benefit funds are included, the total take in the first 11 months of 2021 was 523.9 trillion won, up 86.1 trillion won on year.
 
Spending increased along with revenue.
 
Due to support for small businesses affected by Covid-19 and the vulnerable, spending in the first 11 months was 546.3 trillion won, up 45 trillion won on year.  
 
The fiscal deficit was 22.4 trillion won, down from 63.3 trillion won in the same period a year earlier. 
 

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]
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