The red in South Korean public balance stretched to near 100 trillion ($84 billion) despite an increase in tax revenue for the first time this year in July after three rounds of supplementary budgets and at this rate, the fiscal deficit is projected to reach 691 trillion won by 2022, according to the finance ministry..
According to data released by the Ministry of Economy and Finance, total revenue came to 280.4 trillion won in the January-July period and total expenditure 356 trillion won. When excluding social security funds including pension and employment insurance, the country’s fiscal deficit was 98.1 trillion won during the cited period.
In July alone, national tax income stood at 35.6 trillion won, up 2.4 trillion won from a year ago, marking the first on-year increase this year.
Income tax revenue amounted to 8.1 trillion won in July, up 700 billion won from a year ago and levies earned from property ownership and capital gains in securities investment surged 1.3 trillion won to 4.1 trillion won. Transportation tax revenue increased 1.2 trillion won to 2.5 trillion won in July from a year ago.
Taxes collected from corporations, however, extended its losing streak, falling 100 billion won to 1.5 trillion won and from value-added tax 1 trillion won to 17.4 trillion won to suggest ongoing depression in consumer and corporate spending.
For January-July period, however, Korea collected 168.5 trillion won in taxes – 20.8 trillion won less than the same period last year. Tax collection rate – or taxes collected versus annual target – was 60.3 percent, 4.2 percentage points lower than last year’s 64.5 percent.
Revenue from corporate tax fell 13.6 trillion won in the January-July period while value-added tax 4.5 trillion won and income tax 3 trillion won.
Tax collection rate for corporate taxes was 8.9 percentage points lower than last year and for income tax 6.9 percentage points lower. The rate for value-added tax was 0.2 percentage points higher at 74.9 percent.
Total revenue that includes tax revenue, extra tax income, and general fund revenue reached 54.4 trillion won in July, up 6.5 trillion won from a year ago. In the first seven months, however, the total amount was 13.5 trillion won less at 280.4 trillion won.
Total expenditures increased 6.4 trillion won to 40.1 trillion won in July and 37.8 trillion won to 356 trillion won in the January-July period.
The consolidated fiscal account – which is total revenue minus total expenditure – posted a surplus of 14.4 trillion won in July but a deficit of 75.6 trillion won in the January-July period. The deficit widened from last year’s 51.3 trillion won.
The operational budget balance – which excludes four social security-related funds from the consolidated balance – recorded a surplus of 12.4 trillion won in July but a deficit of 98.1 trillion won in the January-July period. The deficit stretched from 49.9 trillion won in the same period last year.
Operational budget deficit has widened every month this year. The deficit in the January-July period narrowed from 110.5 trillion won in the January-June period but still is near 100 trillion won, the largest since 2011.
The central government’s debt reached 781 trillion won as of end of July, up 16.9 trillion won from the end of June after three extra budgets. Treasury balance gained 16.2 trillion won and national housing bond balance 500 billion won.
The ministry said 71.7 percent of projects subject to early execution by central government and public institutions this year were carried out as of July.
A separate document submitted by the government to the National Assembly showed on Monday 593.1 trillion won or 62.8 percent of 945 trillion won worth of national debt next year has been booked as deficit, which is up 81.9 trillion won from 511.2 trillion won that includes three extra budgets.
National debt includes general debt and a deficit. Debt in general can be repaid as it is backed by national housing funds and foreign exchange stabilization bonds. But deficit, or the net money taken in if negative, would have to be covered by tax revenue.
Fiscal deficit is projected to account 64.6 percent of 1,070.3 trillion won in national debt in 2022, 66.5 percent of 1,196.3 trillion won in 2023, and 67.8 percent of 1,327 trillion won in 2024.
Interest to cover the deficit is expected to increase from 12.7 trillion won this year to 15.7 trillion won in 2021, 17 trillion won in 2022, 18.2 trillion won in 2023, and 19.3 trillion won in 2024.
Fiscal deficit is projected to reach 691 trillion won in 2022 – the final year under Moon Jae-in administration – up 84.5 percent from 374.8 trillion won in the administration beginning in 2017. The growth is significantly higher than 72.7 percent under previous Lee Myung-bak administration and 70.4 percent under Park Geun-hye administration.
By Lee Eun-joo
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]