Economic woes cause $39 billion drop in Korea’s finances

Economy

Published: 31 Jan. 2024, 16:34

Economic woes cause $39 billion drop in Korea’s finances

An employee categorizes tax bills at a post office in Gangnam District, southern Seoul, on Nov. 24. [YONHAP]

Korea’s national tax revenue fell 13 percent on-year in 2023, largely due to a decline in income and corporate taxes amid weak economic activities.

The government collected 344.1 trillion won ($257.7 billion) in taxes last year compared to 395.9 trillion won a year earlier, a difference of $39 billion, said the Ministry of Economy and Finance on Wednesday. It attributed weak corporate earnings and a contracted capital market, especially in the real estate sector.

Tax revenue was 56.4 trillion won short of the ministry’s forecast made in the 2023 budget planning, though it was 2.7 trillion won higher than its revised forecast made last September. Tax revenue has fallen short for two straight years since 2022. Such a shortfall was also reported in 2013 and 2014 under the former Park Geun-hye administration.

The amount of collected income tax fell 10 percent on-year to 115.8 trillion won, largely driven by a fall in capital gains tax caused by a reduced number of property transactions.

The number of transactions for housing units plunged 7.1 percent from Nov. 2022 through Oct. 2023 from the same period a year earlier, ministry data showed. The number of transactions for land slid 32.4 percent over the same period.

Collection of corporate tax fell 22.4 percent on year to 80.4 trillion won due to weak corporate earnings, dragged down by the economic slowdown and restrictive monetary policy that kept borrowing costs high.

Operating profit of listed companies combined nose-dived 70.4 percent in the first half of 2023 on-year to 18.8 trillion won.

The value-added tax collected fell 9.6 percent to 73.8 trillion won over the same period due to weak private spending and a decline in imports. Policy support measures, like the extension of tax cuts on fuel consumption, also lowered tax revenue collected from transportation.

The government saw an increase in education tax by 10.9 percent to 5.2 trillion won.

BY JIN MIN-JI [jin.minji@joongang.co.kr]