To effectively support the National Assembly with its review of the first supplementary budget bill for 2015, the administration published a report, Analysis on the First Supplementary Budget Bill for 2015,on July 10. Its key points are as follows:
For economic impact of the supplementary budget, assuming that the fiscal stimulus package involving about KRW 22 trillion is 100 percent implemented during the third quarter of 2015, its total economic impact would be estimated at 0.26%p in 2015 and 0.32%p in 2016. In order for the economic impact of such fiscal stimulus package to be tangible within this year, the package needs to be implemented in a timely manner. Moreover, because the national debt will increase from 37.5% (KRW 579.5 trillion) in 2015 to 39.8% (KRW720.4 trillion) due to supplementary budgets with the result of aggravating fiscal soundness, legislating fiscal rules suitable for the country's fiscal circumstances should be duly considered.
With respect to the 5.6 trillion-won tax revenue revision to make up for the tax revenue shortfall resulting from delay in the economic recovery, tax revenues need to be adjusted downward to be more realistic and the shortfall resulting from the adjustment needs to be filled through issuance of government bonds. This would avoid a sharp reduction in fiscal expenditures for the second half of the year. The revenue loss is expected to be KRW 5.3 trillion, which is KRW 0.3 trillion less than the government's estimate. The forecast for key tax items including VAT, corporate tax, and income tax is also likely to be inaccurate. As alternatives, the report suggested ensuring the objectivity of the government's tax revenue outlook, further disclosing information on national taxes, and enhancing the timeliness of information disclosure.
Concerning projects requiring funding, the Office found errors in 36 projects by 14 ministries and agencies that are included in the supplementary budget bill have a total of 45 problems. In light of the type of problems, (i) 16 projects are unlikely to be implemented by the end of the year; (ii) 16 projects have poor project plans and do not adequately undergo prior procedures; (iii) 3 projects have unclear benefits; and (iv) 10 projects have other problems including failure to present expenditure plan revisions after an increase in funding.
Budget Analysis Office
For economic impact of the supplementary budget, assuming that the fiscal stimulus package involving about KRW 22 trillion is 100 percent implemented during the third quarter of 2015, its total economic impact would be estimated at 0.26%p in 2015 and 0.32%p in 2016. In order for the economic impact of such fiscal stimulus package to be tangible within this year, the package needs to be implemented in a timely manner. Moreover, because the national debt will increase from 37.5% (KRW 579.5 trillion) in 2015 to 39.8% (KRW720.4 trillion) due to supplementary budgets with the result of aggravating fiscal soundness, legislating fiscal rules suitable for the country's fiscal circumstances should be duly considered.
With respect to the 5.6 trillion-won tax revenue revision to make up for the tax revenue shortfall resulting from delay in the economic recovery, tax revenues need to be adjusted downward to be more realistic and the shortfall resulting from the adjustment needs to be filled through issuance of government bonds. This would avoid a sharp reduction in fiscal expenditures for the second half of the year. The revenue loss is expected to be KRW 5.3 trillion, which is KRW 0.3 trillion less than the government's estimate. The forecast for key tax items including VAT, corporate tax, and income tax is also likely to be inaccurate. As alternatives, the report suggested ensuring the objectivity of the government's tax revenue outlook, further disclosing information on national taxes, and enhancing the timeliness of information disclosure.
Concerning projects requiring funding, the Office found errors in 36 projects by 14 ministries and agencies that are included in the supplementary budget bill have a total of 45 problems. In light of the type of problems, (i) 16 projects are unlikely to be implemented by the end of the year; (ii) 16 projects have poor project plans and do not adequately undergo prior procedures; (iii) 3 projects have unclear benefits; and (iv) 10 projects have other problems including failure to present expenditure plan revisions after an increase in funding.
Budget Analysis Office