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Korea’s tax revenue to fall short by $44.5 billion, Finance Ministry says

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Officials at the Finance Ministry announce a revised estimate for this year's tax income on Monday at the government complex in Sejong. [YONHAP]
Officials at the Finance Ministry announce a revised estimate for this year’s tax income on Monday at the government complex in Sejong. [YONHAP]

Korea will collect 59.1 trillion won ($44.5 billion) less in tax this year than initially estimated due to dwindling corporate profits and the downturn in financial markets.

The Ministry of Finance and Economy said Monday this year’s tax income will come at 341.4 trillion won, down 14.8 percent compared to the initial projection of 400.5 trillion won.

The shortfall marks the largest since related data was compiled.

The downbeat revision is attributed to falling tax revenues in the first six months as export-oriented Korean companies like Samsung Electronics and SK hynix took a hit from sluggish demand for chips and electronic devices.

Corporate taxes made up 40 percent — or 25.4 trillion won — in the deficient taxes. Capital gains followed at 12.2 trillion won, and value added came in at 9.3 trillion won.

The ministry has failed to properly estimate the annual tax revenue for three consecutive years, generating double-digit difference rates between the initial and later forecasts.

The government could tap into last year’s budget surplus and the ministry’s own funds as resources to make up for the shortfall, the ministry said, instead of asking for a supplementary budget.

“We apologize for the wide margin of error for three years in a row,”Jeong Jeong-hoon, the ministry’s head of tax policy, said.

“For the years of 2021 and 2022, corporate earnings were better than expected with the easing of the Covid-19 pandemic and subsequent expansionary monetary policies across the globe,” he said. “This year, however, revenues from corporate taxes and other capital market gains quickly declined due to high interest rates and weak exports of key items including semiconductors.”

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]

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