The deficit in South Korea’s consolidated fiscal balance hit an all-time high as the government increases welfare spending amid a falling tax revenue due to an economic downturn.
Corporate tax revenue decreased 600 billion won (US$501.46 million) on year in August due to companies’ poor performance, while the country’s national debt came to 700 trillion won (US$585.04 billion). With fiscal warning signs everywhere, the goods account surplus stood at US$4.77 billion (5.71 trillion won), down 50 percent from a year ago.
The cumulative amount of national tax income from January to August was 209.50 trillion won (US$175.09 billion), down 3.70 trillion won (US$3.09 billion) from a year earlier, according to the October issue of the monthly fiscal trend released by the Ministry of Economy and Finance (MOEF) on Oct. 8. It is the first drop since 2014. Tax collection stood at 71.1 percent, down 1.5 percentage points from 72.6 percent a year ago.
Taxation conditions are getting worse. Corporate tax revenue in August fell 600 billion won (US$501.46 million) from 12.50 trillion won (US$10.45 billion) last year to 11.90 trillion won (US$9.95 billion) this year. The cumulative figure during the January-August period came to 56.30 trillion won (US$47.05 billion) and the rate of tax collection was 71.1 percent, down 6.4 percentage points from last year. The cumulative amount of income tax as of August totaled 58.20 trillion won (US$48.64 billion), down 1.10 trillion won (US$919.35 billion) from last year, while the additional tax decreased 400 billion won (US$334.31 million) to 49.80 trillion won (US$41.62 billion).
On the other hand, cash budgets for welfare, including short-term jobs, surged, pushing up the country’s fiscal deficits. The total expenditure from January to August amounted to 348.90 trillion won (US$291.60 billion), up 37.80 trillion won (US$31.59 billion) from a year earlier. Accordingly, the nation's consolidated fiscal balance, or the difference between the total revenues and total expenditure, showed a deficit of 22.30 trillion won (US$18.64 billion) until August. It posted a surplus of 16 trillion won (US$13.37 billion) at the end of August last year but it went into deficit this year.
The operational budget balance, which excludes the four social security-related funds from the consolidated fiscal balance, posted a deficit of 49.5 trillion won (US$41.37 billion). It is the highest figure since consolidated data was compiled from 1999. The operational budget balance shows actual financial conditions.
The country’s national debt totaled 697.90 trillion won (US$583.28 billion) as of end-August, up more than 46 trillion won (US$38.45 billion) this year alone. The figure is expected to exceed 700 trillion won (US$585.04 billion) in September.