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| First Vice Minister of Economy and Finance Bang Ki-sun presides over an emergency meeting among vice ministers to discuss exports and investment at the Government Complex Seoul in central Seoul, Friday. The tax revenue in Korea fell 24 trillion won amid sluggish exports, a housing slump and other factors accelerating economic slowdown. Yonhap |
By Yi Whan-woo
Tax revenue in Korea fell 24 trillion won ($17.9 billion) in the first quarter of the year from a year earlier, recording the sharpest year-on-year decline since relevant data has been compiled, the Ministry of Economy and Finance said Friday.
Sources familiar with the government attributed the decrease in tax income to the government's eased tax regulation aimed at inducing businesses to bolster investment instead of having them spend the corresponding amount of money for taxation.
The sources said the government's softened tax policy appears to be backfiring in raising tax income, as businesses are earning less profit due to the economic slowdown and are paying less tax than expected by the government.
The finance ministry said tax revenue amounted to 87.1 trillion won in the January-March period, compared with 111.1 trillion won in the previous year.
The amount of taxes collected during the first three months this year accounted for 21.7 percent of the government's yearly target of 400.5 trillion won for 2023.
Such a rate of tax collection lags behind the annual average of 26.4 percent seen over the past five years and also marks the slowest pace since 2000.
The ministry said the tax revenue hopefully will increase in the latter half of the year, in line with its forecast that the economy will remain sluggish in the first six months but bounce back in the remainder of the year.
It accordingly put aside speculation that it may draw on the supplementary budget.
But the sources believe fulfilling the yearly target is becoming "virtually impossible" even if tax is collected as planned from April to December.
By categories, income tax decreased by 7.1 trillion won year-on-year to 28.2 trillion won. The decline was mainly due to a fall in housing transactions and a prolonged delay in small businesses' payment of capital gains tax and other relevant housing taxes under the state-led pandemic relief aid.
Corporate tax, the government's second-highest source of taxable income after income tax, shrank 6.8 trillion won from the previous year to 24.3 trillion won, in the face of sluggish exports and a drop in exporters' earnings.
The 6.8 trillion won included 1.6 trillion won levied on small- and medium-sized enterprises (SMEs), which were granted tax payment extensions under the government's efforts to help them overcome the tough business environment.
The tax concerning transportation and energy decreased by 0.6 trillion won to 2.6 trillion won, as the government keeps extending the years-long tax cut on fuel to reduce the burden from volatile global oil prices.
The government has been keeping the maximum legal cap for the cut at 25 percent for gasoline and 37 percent for diesel.
