According to the finance ministry, the government is expected to collect more than 250 trillion won (US$223 billion) in national taxes by the end of 2017, up from an earlier target of 242.3 trillion won. (Image: Yonhap)
SEJONG, July 26 (Korea Bizwire) – South Korea’s ratio of tax burden to its gross domestic product (GDP) will likely reach fresh record highs this year and next on a potential tax hike and rapidly rising government spending, government data showed Wednesday.
According to the finance ministry, the government is expected to collect more than 250 trillion won (US$223 billion) in national taxes by the end of 2017, up from an earlier target of 242.3 trillion won.
Through May, tax revenue reached 123.8 trillion won, up 11.2 trillion won from a year earlier, with the amount reaching 51.1 percent of the annual target.
The sharp rise in government income is from a boom in the local real estate market and a hike in cigarette prices. Also, businesses saw their net profits gain ground as they reduced investment amid an economic slump.
At the same time, government spending has been on a steady rise for years as a means to buttress Asia’s fourth-largest economy suffering from faltering exports and sluggish domestic demand. For 2017, it mapped out a 400 trillion-won budget, the largest ever in the country’s history. An 11 trillion-won supplementary budget was also approved by the parliament.
With the increase in government spending and tax revenue, the national tax-to-GDP ratio will touch a record 19.7 percent in 2017, outpacing the earlier record of 19.6 percent set in 2007. It was 19.4 percent last year.
Next year, the figure will likely continue its record-breaking performance as the incumbent Moon Jae-in government is moving to raise income and corporate taxes to finance its welfare and job creation programs.
“The former Park Geun-hye government has effectively increased taxes although it did not actually raise the numbers,” said Sung Tae-yoon, a professor at Yonsei University. “We can raise it further as a tool to ease the deepening income disparity.”
(Yonhap)
