Gov't Expects Massive Tax Shortfall This Year

The government has revised its forecast for tax revenues this year down by another W59.1 trillion this year due to sluggish exports and private consumption (US$1=W1,324).

The Ministry of Economy and Finance now estimates tax revenues this year at W341.4 trillion, much less than the initial forecast of W400.5 trillion.

That is a significant drop from last year's W395.9 trillion and even the W344.1 trillion of pandemic year 2021.

Choi Jin-gyu at the ministry said, "This is the first year on record that the government's tax revenues will decline by more than W50 trillion."

The biggest shortfall will be in corporate tax. The government expected to collect W105 trillion in corporate tax but has now revised that to only W79.6 trillion as companies' earnings shrink in the global economic slump.

According to the Korea Exchange, the combined operating profits of listed companies that close their books in December fell from W29.5 trillion in the first quarter of 2022 to W8.1 trillion a year later. Second-quarter operating profit fell from W31.9 trillion to W10.9 trillion.

Income tax takings are expected to drop from the previous projection of W131.9 trillion to W114.2 trillion largely due to a decline in capital gains tax payments. The slow economy is also likely to reduce VAT revenues from an expected W83.2 trillion to W73.9 trillion.

But the government said the tax shortfall will not lead to cutbacks on infrastructure projects or welfare spending as it plans to tap into a foreign exchange stabilization fund and other surplus government funds.

A ministry official said, "We will be able to issue foreign currency stabilization bonds in won next year, so we will face no problems defending the currency even if we use a forex stabilization fund."