The country may be able to raise more than 300 trillion won ($ 269 billion) in tax revenue this year, up about 17 trillion won from the government’s previous forecast of 282.7 billion won. won, according to government and parliamentary officials.
This, if achieved, would also mark an increase of over 15 trillion won from the 285.5 billion won in tax revenue collected last year.
Last year, the country saw its tax revenues drop 7.9% as corporate tax revenues declined amid the pandemic. But in the first quarter of this year, the government collected 88.5 trillion won, up 19 trillion won from the previous year.
The expectation of higher tax revenues stems from the fact that capital gains tax revenues are likely to rise against a backdrop of booming housing and equity markets. Corporate tax revenues are also expected to increase as companies posted strong profits amid an economic recovery.
The South Korean economy is on a recovery path thanks to strong exports of chips and automobiles. The Bank of Korea (BOK) last week revised its 2021 growth outlook for Asia’s fourth-largest economy to 4% from its previous estimate of 3%.
The larger-than-expected tax revenues could fund another round of supplementary budgets in the second half of the year.
Discussions over another supplementary budget have emerged from the ruling party after President Moon Jae-in said last week that the country must leave the door open for further budget support.
Moon told a national budget strategy meeting that the country needs to maintain its expansionary fiscal policy for now to deal with the fallout from the pandemic despite rising national debt.
The finance ministry said on Friday that it plans to take into account the tax revenue situation and the demand for increased public finances before deciding whether to draw up another supplementary budget.
The government has officially denied reports that it is planning to create another round of emergency relief funds for COVID-19, but there are growing expectations of a new supplementary budget.
South Korea created an additional 14.9 trillion won in March to fund the 20.7 trillion won in emergency aid to small traders and vulnerable people hard hit by the pandemic.
Since last year, the country has drawn up five rounds of supplementary budgets totaling 82 trillion won to deal with the economic fallout from the COVID-19 pandemic.
With the latest supplementary budget, the country’s public debt is expected to reach 965.9 trillion won this year. The debt-to-GDP ratio is likely to reach 48.2%.
Last year, the country’s national debt rose from the highest on record of 123.7 trillion won to a record high of 846.9 trillion won.
The ruling Democratic Party is exploring the idea of ââproviding emergency cash distributions to all households around September. The move aims to boost consumption before the country hits its goal of achieving collective immunity by November.
But controversy over massive relief funds is expected to intensify, with tax authorities opposing the universal payment of emergency funds, citing the debt burden.
The country offered 14.3 trillion won in one-time stimulus checks to all households in May of last year. It has so far provided three rounds of targeted support to small traders and vulnerable groups.
Despite optimistic economic growth prospects, the economic recovery remains uneven across sectors, with income gaps between the haves and have-nots widening, in what is known as a K-shaped recovery (Yonhap )