NABO Fiscal Estimates & Tax Issues (Issue. 24)

Published on Aug., 31, 2023
Published by Estimates and Tax Coordination Division

I. Trends and Issues in Fiscal Estimates
 ·(Review of fiscal demand for legislative bills approved in Q2 of 2023) Of the 177 legislative bills approved in Q2 of 2023, 68 (38.4%) are subject to fiscal enforcement by state and local governments, thus their fiscal standing will be affected afterwards. Implementation of 43 bills, to which a cost estimation has been made, is expected to result in an average annual expenditure increase of 9.8 trillion won over the next 5 years (2024-2028).
 ·(Monthly disclosure status of fiscal information and improvement initiatives) The Ministry of Economy and Finance currently discloses key fiscal details, including total revenues, total expenditures, and fiscal balance, through its fiscal information open system (Open Fiscal Data). However, as information regarding the sourcing status for insufficient national treasury funds is currently unavailable, there is a necessity to enhance confidence in the government's fiscal management by including this information in future disclosures.
 ·(Fiscal projection aligned with the current status of the Basic Pension system and legislative trends) The fiscal projection scenario, corresponding to the proposed bill for expanding the number of beneficiaries or the payment amount of Basic Pension benefits, is expected to result in an average annual expenditure increase of 0.9-25.2 trillion won over the next 5 years (2024–2028).
 ·(Analysis of legislative trends and fiscal demand related to child benefits) The fiscal projection scenario, corresponding to the proposed bill for expanding the number of beneficiaries or the payment amount of child benefits, is expected to result in an average annual expenditure increase of 5.0-12.5 trillion won over the next 5 years (2024-2028).
 ·(Legislative trends and implications for noise prevention and damage support at military airfields and military shooting ranges) The fiscal projection scenario, corresponding to the proposed bill for expanding compensation for damage caused by noise at military airfields and shooting ranges, is expected to result in an average annual expenditure increase of 2.6 billion-2.9 trillion won over the next 5 years (2024–2028).

Ⅱ.Trends and Issues in Tax
 ·(Main contents of Tax Revision Bill 2023)  Tax revision bills, proposed by lawmakers and submitted to the government, will undergo review during the 2023 regular National Assembly session. Each bill primarily seeks to offer tax support to encourage investment and employment, alleviate the burden on the working class and middle class, and provide assistance for childbirth and childcare.
 ·(Analysis of VAT reporting characteristics after the change in the simplified taxation system)  Upon examining the distribution of VAT reporting by businesses near the base amount of the simplified taxation system, a clustering phenomenon emerged, with businesses concentrated to the left of the base amount. This phenomenon implies that taxable entities are likely adjusting their behavior in a manner advantageous to them.
 ·(Status and legislative trends of tax support related to childbirth, marriage, and childcare)  A review is needed to assess the suitable level of tax support policy, considering the bill aimed at expanding assistance for childbirth, marriage, and childcare, and examining support cases in major countries such as the United States, the United Kingdom, and France.
 ·(Legislative trends and implications of tax support for video content)  A review is needed to assess ways for diversifying support methods and adjusting tax credit levels, and improving the usability of the system, considering the bill aimed at expanding tax credits for video content production costs, and examining support cases in major countries such as the United States, Canada, and the United Kingdom.