The NABO said that these worrisome figures are in some part due to the reduction in corporate earnings amid the economic slowdown. (image: Kobiz Media / Korea Bizwire)
SEOUL, Dec. 29 (Korea Bizwire) – Korea’s 2014 tax revenue will likely miss its target by 11.7 trillion won (US$ 10.6 billion) to 12.7 trillion won (US$ 11.5 billion), according to a statement from the National Assembly Budget Office (NABO) on December 28.
Korea’s tax revenue shortfall has been on the rise from 2.8 trillion won (US$ 2.5 billion) in 2012 to 8.5 trillion won (US$ 7.7 billion) in 2013. If confirmed, South Korea is expected to miss its budget target for the third consecutive year.
The NABO estimated in October that the tax revenue shortfall for 2014 would be 10.7 trillion won (US$ 9.6 billion) based on income from January to July. However, the government revised its earnings for the period of January to October 2014, and re-estimated its 2014 revenue shortfall to amount up to 12.7 trillion won (US$ 11.5 billion).
The NABO said that these worrisome figures are in some part due to the reduction in corporate earnings amid the economic slowdown. The growth rate of locally listed corporations’ net profit slowed from 4.1 percent in the first quarter to 1.6 percent in the second quarter. The growth rate fell to negative 11.9 percent in the third quarter of 2014.
Decreases in the won-dollar exchange rate and commodity prices lowered revenue from value added tax and customs collections, contributing to the discrepancy between the government’s estimation in 2013 and the actual amount of collected tax this year. Some have criticized the Korean Government for being overoptimistic with their revenue estimations. Finance minister Choi Kyung-hwan forecasted in October that the shortfall would not exceed 10 trillion won (US$ 9.0 billion).
The portion of budgeted but unused fiscal spending already hit a record-high 18.1 trillion won (US$ 16.4 billion) in 2013 from 5.7 trillion won (US$ 5.2 billion) in 2012. The Ministry of Finance and Strategy said on December 9 that the government would frontload 68 percent of its 2015 budget in the first half of the year in order to revive the economy.
By J. W. Choi (summerchoi@koreabizwire.com)
