Tax revenue through July falls $6.6 billion in 2024

Economy

Tax revenue through July falls $6.6 billion in 2024

Published: 30 Aug. 2024, 18:20

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 so far this year declined by 8.8 trillion won ($6.6 billion), or 4 percent, compared to the same period a year earlier, despite an on-year increase in July.

Dampened by a drop in corporate taxes, this year’s revenue is expected to fall short of the initial target, following a record shortfall last year.

According to the Ministry of Economy and Finance on Friday, the government collected 208.8 trillion won in taxes from January to July, down 8.8 trillion won on year.

On a monthly basis, however, tax revenue rose by 1.2 trillion won on year to 40.3 trillion won in July. The increase was mainly due to the growth in imports in July, which rose 10.5 percent to $53.9 billion.

Regardless, the tax collected during the first seven months of the year accounted for only 56.8 percent of the government’s revenue target of 367.3 trillion won, falling short of an average of 64.3 percent over the past five years, and also 6.5 percentage points short of last year’s 63.3 percent.

Corporate tax revenue remained particularly low, dropping 31.9 percent or 15.5 trillion won to 48.5 trillion won. The ministry attributed the steep fall to the lingering impact of a plunge in corporate earnings last year, as the combined operating profit of Korean companies listed on the benchmark Kospi bourse dropped 45 percent.

Securities transaction tax revenue fell 11.1 percent to 3.5 trillion won due to a 0.02 percentage point cut in the tax rate. The rate reduction was implemented by the government this year in exchange for passing the capital gains tax, which is scheduled to take effect next year. However, the Yoon Suk Yeol administration and the People Power Party have been pushing to abolish the capital gains tax.

“As the current slow trend in tax collection is expected to be difficult to reverse, there are also downside factors that may further worsen the situation in the latter half of the year,” said the National Assembly Budget Office in a report published on Aug. 26, citing sluggish domestic demand as one of the risks.

"If a significant tax shortfall is expected, the government should enhance public disclosure and promptly come up with fiscal management measures based on an advance warning system,” warned the report.

Corporate tax revenue may rebound in August if companies make interim tax payments, which allow them to pay a portion of this year's tax obligation in advance.

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