The National Assembly Budget Office (Chief Kyung-bok Cook) published ｢Total Revenue Settlement Analysis of the 2013 Fiscal Year｣ to evaluate the tax revenue settlement of the 2013 fiscal year submitted by the administration and to discuss improvement points to be considered in this year’s financial operation and next year’s budget planning.
The total revenue of the 2013 fiscal year is expected to be 351.9 trillion won, down by 8.9 trillion won from the budget figure (360.8 trillion won) due to sluggish national tax revenue, etc. As 201.9 trillion won, which is lower than the budget (210.4 trillion) by 8.5 trillion won (△4.0%), was collected as national tax, deficits were recorded for the second year in a row following 2012 (△2.8 trillion won against the budget). Non-national tax revenue was 149.9 trillion won, which is 0.5 trillion won lower than the budget (150.4 trillion won) due to low non-tax revenue (△3.7 trillion won) in spite of an increase in fund revenue (+3.3 trillion won).
The sluggish national tax revenue in 2013 is analyzed to be attributable to worsening corporate profitability, sluggish domestic demand including the slowdown of private consumption etc., and the downturn of the real-estate/stock market. Due to aggravated corporate profitability, the corporate tax revenue decreased by 2.1 trillion won (△4.5%) compared to the previous year and was lower than the budget by 2.1 trillion won (△4.6%). Due to sluggish domestic demand including the slowdown of consumption, the VAT revenue was lower than the budget by 1.1% (△0.6 trillion won), and its growth rate has substantially decreased compared to the previous year (7.2→0.5%). Due to the downturn of the stock/real-estate market, the transfer income tax revenue (△10.7%) and stock exchange tax revenue (△16.4%) decreased by double digit rates.
Other than those factors based on economic cycle, it is highly likely that the structural changes of the Korean economy after the global financial crisis has had an impact on the recent sluggish tax revenue. This is because the structural changes, including the imbalance between export-domestic demand and manufacturing-service industries, and income disparity in the personal and corporate sectors has lowered the buoyancy of tax revenue increase on the growth rate.
The tax revenue forecast error in 2013 expanded to △14.5 trillion won compared to the main budget and △8.5 trillion compared to the revised supplementary budget due to the government’s optimistic forecast on growth rate. In the 2013 budget planning, the government assumed the current price GDP growth rate at 6.9% in the main budget and 4.3% in the revised supplementary budget, both of which were higher than the real figure (3.7%). Fundamentally, the macroeconomic forecast of the government which is the foundation for tax revenue budget planning should become more realistic. In addition, there should be efforts to complement the limitations of the traditional tax revenue calculation method which utilizes the long-term/stable relation between national tax revenue and current price GDP including through expanding micro approaches, etc.
The administration’s plan to secure resources for tax revenue through pledges was analyzed. First, the tax revenue increase by the legalization of the underground economy in 2013 is estimated at 3.1 trillion won or 116% of the planned 2.7 trillion won. While this is interpreted as a result of tightened tax collection including through tax investigation as part of the efforts to complement tax revenue in 2013, it is analyzed to be challenging to generate such continuous tax revenue impact going forward. Second, as the actual reorganization amount of the non-taxation/tax cut system in 2012~2013 was only about 3.9 trillion won, which is only 26% of the original plan of 15.3 trillion won to be secured as tax revenue, it is falling substantially short of the government’s original annual plan. More aggressive efforts to reduce non-taxation/tax-cuts are required going forward.
In addition, the current status and causes of the sluggish sales of land and stocks owned by the government and sluggish collection of fines and penalties were analyzed.
The total revenue of the 2013 fiscal year is expected to be 351.9 trillion won, down by 8.9 trillion won from the budget figure (360.8 trillion won) due to sluggish national tax revenue, etc. As 201.9 trillion won, which is lower than the budget (210.4 trillion) by 8.5 trillion won (△4.0%), was collected as national tax, deficits were recorded for the second year in a row following 2012 (△2.8 trillion won against the budget). Non-national tax revenue was 149.9 trillion won, which is 0.5 trillion won lower than the budget (150.4 trillion won) due to low non-tax revenue (△3.7 trillion won) in spite of an increase in fund revenue (+3.3 trillion won).
The sluggish national tax revenue in 2013 is analyzed to be attributable to worsening corporate profitability, sluggish domestic demand including the slowdown of private consumption etc., and the downturn of the real-estate/stock market. Due to aggravated corporate profitability, the corporate tax revenue decreased by 2.1 trillion won (△4.5%) compared to the previous year and was lower than the budget by 2.1 trillion won (△4.6%). Due to sluggish domestic demand including the slowdown of consumption, the VAT revenue was lower than the budget by 1.1% (△0.6 trillion won), and its growth rate has substantially decreased compared to the previous year (7.2→0.5%). Due to the downturn of the stock/real-estate market, the transfer income tax revenue (△10.7%) and stock exchange tax revenue (△16.4%) decreased by double digit rates.
Other than those factors based on economic cycle, it is highly likely that the structural changes of the Korean economy after the global financial crisis has had an impact on the recent sluggish tax revenue. This is because the structural changes, including the imbalance between export-domestic demand and manufacturing-service industries, and income disparity in the personal and corporate sectors has lowered the buoyancy of tax revenue increase on the growth rate.
The tax revenue forecast error in 2013 expanded to △14.5 trillion won compared to the main budget and △8.5 trillion compared to the revised supplementary budget due to the government’s optimistic forecast on growth rate. In the 2013 budget planning, the government assumed the current price GDP growth rate at 6.9% in the main budget and 4.3% in the revised supplementary budget, both of which were higher than the real figure (3.7%). Fundamentally, the macroeconomic forecast of the government which is the foundation for tax revenue budget planning should become more realistic. In addition, there should be efforts to complement the limitations of the traditional tax revenue calculation method which utilizes the long-term/stable relation between national tax revenue and current price GDP including through expanding micro approaches, etc.
The administration’s plan to secure resources for tax revenue through pledges was analyzed. First, the tax revenue increase by the legalization of the underground economy in 2013 is estimated at 3.1 trillion won or 116% of the planned 2.7 trillion won. While this is interpreted as a result of tightened tax collection including through tax investigation as part of the efforts to complement tax revenue in 2013, it is analyzed to be challenging to generate such continuous tax revenue impact going forward. Second, as the actual reorganization amount of the non-taxation/tax cut system in 2012~2013 was only about 3.9 trillion won, which is only 26% of the original plan of 15.3 trillion won to be secured as tax revenue, it is falling substantially short of the government’s original annual plan. More aggressive efforts to reduce non-taxation/tax-cuts are required going forward.
In addition, the current status and causes of the sluggish sales of land and stocks owned by the government and sluggish collection of fines and penalties were analyzed.