[Graphics by Song Ji-yoon]
South Korea’s ruling Democratic Party’s proposal for a second extra budget this year is gaining momentum as the government is forecast to collect $15 billion more than expected in tax revenue this year thanks to the hot asset market and stronger-than-expected economic rebound.
According to multiple sources from the government and National Assembly on Sunday, the country’s tax revenue is projected to exceed 300 trillion won ($269.1 billion) this year, up 15 trillion won from last year’s 285.5 trillion won and 17 trillion won from the government’s revenue estimate of 282.7 trillion won.
The government`s tax revenue estimate for this year had been conservative as the budget was drawn up during the peak of Covid-19 havoc in summer last year.
Tax revenue growth started to pick up from the latter half of last year, helping the government collect 285.5 trillion won in taxes last year, 5.8 trillion won more than the earlier estimate of 279.7 trillion won.
In the first three months of 2021, Korea’s tax revenue increased 19 trillion to 88.5 trillion won from a year ago. Another 19 trillion won is expected in the second quarter from a year ago and soften in the second half.
The estimated 17 trillion won addition in tax revenue can help back government rationale for extra budget if necessary as it does not have to issue debt. The government has already created 14.9 trillion won in supplementary budget in March.
President Moon Jae-in recently argued for more aggressive spending to address polarization in jobs and income.
First Vice Finance Minister Lee Eog-weon also hinted at additional extra budget for this year, saying in a briefing last week that the government plans to comprehensively review the need for an additional fiscal boost in the second half after taking account of tax revenue conditions.
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]