À̹ÌÁö È®´ë South Korea¡¯s fiscal deficit in the first five months stretched to 78 trillion won ($65 billion), more than doubled from a year ago due to record spending and reduced tax income amid the worst pandemic in modern history.
Tax revenue by May this year was 118.2 trillion won, down 21.3 trillion won from the same period a year ago, the Ministry of Economy and Finance reported Tuesday.
Non-tax revenue rose by 400 billion won and fund income by 3.3 trillion won during the same period. But this was not enough to offset the sharp drop in income taxes from companies and individuals.
The government collected a total of 198.2 trillion won in taxes, down 17.7 trillion won from a year earlier, the biggest fall since monthly records began in 2011. The tax collection rate as of May was at 40.6 percent of the annual target, 6.7 percentage points lower from the previous year.
Corporate taxes were mostly to blame for the shortage. In the first five months of the year, the government collected 26.1 trillion won from corporations, down 13.9 trillion won from the year-ago period.
Local businesses have been struggling last year even before the arrival of the pandemic. Tax payments were also deferred as the government granted a delay in tax deadlines amid the COVID-19 crisis.
Individual income tax also fell 900 billion won to total 36.6 trillion won. Value-added tax income was down 2.8 trillion won at 29.2 trillion won on subdued domestic demand.
Fiscal spending, meanwhile, surged 24.5 trillion won to reach 259.5 trillion won in the January-May period. Outlays in May alone rose 11.5 trillion won to 49.8 trillion won.
À̹ÌÁö È®´ë On top of an already outsized 2020 budget, the government has ramped up spending to counter the unprecedented challenges posed by the coronavirus. The Korean parliament last week passed a record 35.1-trillion-won extra budget in support of the virus relief effort. The government has already used up two increased budgets – worth 11.7 trillion won and 12.2 trillion won – raised immediately after the outbreak.
This has resulted in a consolidated fiscal deficit of 61.3 trillion won, more than three times the 19.1 trillion won logged in the same period last year. When excluding social security funds including pension and employment insurance, the fiscal deficit was 77.9 trillion won, double last year`s amount. After reflecting the third budget increase, the deficit is expected to widen to 111.5 trillion won by the end of the year.
Government debt now totals 764.2 trillion won, up 78.8 trillion won from a year earlier.
Experts warn that the rapid pace of deficit growth could threaten Korea¡¯s financial integrity, which underpins its economic strength and solid sovereign rating.
Government debt over the past three years under President Moon Jae-in has climbed by 10 percentage points, weighing heavily on the budget balance.
Fiscal spending snowballed from 330 trillion won in 2011 to 400 trillion won in 2017 and 500 trillion won this year. By 2022, this is expected to top 600 trillion won.
By Moon Jae-yong, Yang Yeon-ho and Kim Hyo-jin
[¨Ï Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]