Tax revenue plunges $7.27B through June on weak corporate earnings

Economy

Tax revenue plunges $7.27B through June on weak corporate earnings

Published: 31 Jul. 2024, 18:39

SHIN HA-NEE
shin.hanee@joongang.co.kr

The headquarters of the Ministry of Economy and Finance in Sejong [MINISTRY OF ECONOMY AND FINANCE]

Korea's tax revenue dropped by 10 trillion won ($7.27 billion) during the first half of this year from the same period last year, dampened mainly by a huge plunge in corporate taxes.

Although the government expects corporate tax earnings to rebound in the remainder of the year, the growing tax revenue shortfall may add further resistance to the Yoon Suk Yeol administration’s recently-announced tax cut initiatives.

According to the Ministry of Economy and Finance on Wednesday, the government collected 17.5 trillion won in taxes in June, down by 900 billion won from a year earlier. Corporate tax revenue, in particular, dropped 700 billion won on year to 2.3 trillion won, which the ministry attributed to the lingering impact of a drop in corporate earnings last year.

Weighed down by a slowdown in chip demand and the resulting plunge in Samsung Electronics’ earnings, the combined operating profit of Korean companies listed on the benchmark Kospi bourse dropped 45 percent last year.

The total amount of taxes collected from January to June came to 168.6 trillion won, down 10 trillion won from the same period last year.

The tax collected during the first six months of the year accounted for 45.9 percent of the government’s revenue target of 367.3 trillion won, falling short of an average of 52.6 percent in the past five years, and is also 6 percentage points short of last year’s 51.9 percent.

The government collected 30.7 trillion won in corporate taxes through June, down 16.1 trillion won, or 34.4 percent, and 58.1 trillion won in income taxes, up 0.3 percent from last year. Securities transaction tax revenue dipped 9.5 percent to 2.7 trillion won despite on-year growth in trading volume due to a 0.02 percentage point cut in the tax rate. A fall in imports also brought the amount of tariffs collected to 3.3 trillion won, down 5.7 percent.

“As corporate performance improved in the first half of the year, bonus payments are expected to increase in the latter half, which will boost income taxes,” said Yoon Soo-hyeon, director of tax revenue analysis at the Finance Ministry, during a briefing on Wednesday.

The shortfall may further hinder the government’s plan to reform taxes as announced on July 25. The proposed reform, which is expected to reduce the country’s tax revenue by 4.35 trillion won through 2029, requires parliamentary approval yet is facing significant backlash from the liberal Democratic Party.

Korea saw a record shortfall in tax revenue last year as the government collected 344.1 trillion won in taxes, 56.4 trillion won short of the ministry’s initial target.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]