South Korea is forecast to suffer a massive tax revenue shortfall for the second consecutive year in 2024 due mainly to weak corporate activities amid an economic slowdown last year, the finance ministry said Thursday. The government is projected to collect 337.7 trillion won (US$253.41 billion) in taxes this year, a 8.1 percent fall, or 29.6 trillion won, from its forecast made in the 2024 budget planning, according to the Ministry of Economy and Finance. The revised amount was also 6.4 trillion won smaller than last year's tax revenue of 344.1 trillion won, when the country suffered a record shortfall of 56.4 trillion won. "Corporate tax revenue is expected to be reduced greater than earlier expected, among other things, as we experienced weak global trade and the sluggish semiconductor industry last year," a ministry official said. This illustration depicts a revenue shortfall. (Yonhap) This illustration depicts a revenue shortfall. (Yonhap) The corporate tax to be collected this year is projected t o reach 63.2 trillion won, down 14.5 trillion won from its earlier forecast. The income tax is also likely to sink by 8.4 trillion won to 117.4 trillion won. The shortfall of 4.1 trillion won is expected from transportation, energy and environment taxes as the government extended the fuel tax cut scheme, according to the forecast revision. "I feel a heavy responsibility as a finance minister for making errors in revenue forecasts for four years in a row since the COVID-19 pandemic. We will change the whole calculation process," Finance Minister Choi Sang-mok told a parliamentary session Thursday. "The government will maximize all resources available to implement the budget approved by the National Assembly as planned while maintaining financial sustainability," he added. But the ministry made it clear that it will not seek an extra budget, though it has failed to present a detailed plan on how to make up for the shortfall. "An extra budget is supposed to be created when we experience a serious economic recession or massive layoffs. A debt sale will also add pressure on future generations and would affect our credit rating," the official said. The government plans to use quasi-taxes and other funds while adjusting planned projects. Subsidies for local governments could also be adjusted. Critics say the shortfall was due, at least in part, to the government's various tax cut schemes for large conglomerates and the rich despite tight budgeting. But the Yoon Suk Yeol administration has said that such measures are aimed at promoting corporate investment and consumption to spur economic growth, and the situation is expected to get better next year as the economy is on a path for recovery on the back of strong exports. "We will come up with various ways to handle the issue in consultation with the National Assembly," the official said. Source: Yonhap News Agency
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