According to the “2016 Tax Expenditure Proposal” submitted by the administration to the National Assembly on September 11, the national tax exemption for 2014 was 34.3383 trillion won, and the corresponding amounts for 2015 and 2016 are estimated at 35.6656 trillion won and 35.3325 trillion won, respectively. This “Analysis of the 2016 Tax Expenditure Proposal” explored the management of tax expenditures and analyzed the administration's plans to revamp tax expenditures for this year and their revenue effects. The administration has continually modified the tax expenditure system in order to widen the revenue base, which is significant not only for increasing sources of taxation but also for improving the equity of the tax burden and economic efficiency, which are basic principles of taxation. 

  There are currently 229 tax expenditure items in 2015 (263 items if items associated with transitional provisions included). The administration proposed that it would abolish 19 items including non-taxable property accumulation savings  among 88 items expected to expire this year, newly introduce 15 items including non-taxable individual wealth accounts, and downsize 13 items including tax credit for R&D costs. The “2016 Tax Expenditure Proposal” estimates that the abolishment (246.8 billion won), introduction (−789.2 billion won), and downsizing (690 billion won) of the items subject to tax reduction & exemption would generate 147.6 billion won in annual tax revenue. As this is far below the average amount modified (1.5365 trillion won) for the past three years (2012–2014), it is expected to have little effect on increasing tax revenue in the future. 

  Given the fact that the efforts to abolish or downsize tax expenditure items inevitably entail limitations, it is advisable to seek ways to improve systems, including capping aggregate tax expenditures and increasing sunset provisions, and to review ways to improve efficacy of the tax expenditure evaluation system that came into effect this year. Despite the government's ongoing efforts to modify tax expenditures, the national tax exemption amount is still rising, which demonstrates that current systems are not effective in reducing the amount. In order to cap the aggregate tax expenditure, reducing the size of tax exemption or replacing tax exemption with financial support should be considered when amending the tax expenditure system. As tax expenditures are evaluated at the time when the systems concerned are about to expire, items that have no sunset provisions have not been thoroughly assessed. To ensure rigorous evaluation of these items and systematic modification of tax expenditures, sunset provisions need to be introduced to these items. Though the tax expenditure evaluation system took effect this year for the first time, during the preliminary feasibility test for newly introduced items, 14 items were excluded from evaluation because they were deemed eligible for exception to evaluation (e.g., difficulty in estimation, economic & societal environment); and during the in-depth evaluation of items subject to sunset provisions, five items were excluded on the grounds of policy needs and for budgetary reasons. To tighten the management of tax expenditure items and ensure more effective institutional modification, there seems to be a need to improve the evaluation system by complementing exception provisions, and otherwise.