Photo: National Tax Service. Credit: National Tax Service.
Just a year and a half ago, under the Moon Jae-in 문재인 administration, the big tax-related news was about the Ministry of Finance and Strategy 재정기획부 understating tax revenues by KRW 50t (USD 37.2b) after incessantly whinging that the Moon administration’s COVID stimulus plan was “emptying the nation’s storehouse.” Now, the MSF has the opposite problem: the actual deficit in the South Korean budget is significantly outpacing the MSF’s projections.
The MSF announced on May 14 that the South Korean government budget deficit for Q1 2023 was KRW 54t (USD 40.2b) following a period of stagnation for the Korean economy. If the current trend continues, South Korea is likely to see a deficit of over KRW 100t (USD 74.5b) by the end of the year - nearly double the MSF’s projected deficit of KRW 58.2t (USD 43.4b).
The MSF insists that the deficit will not reach KRW 100t, citing seasonal fluctuations in the deficit depending on major tax deadlines. But the MSF’s argument also depends on the assumption that the global economy will begin picking up in the later half of this year. The next few months will reveal whether this assumption holds. If it does not, the Yoon Suk-yeol 윤석열 administration may have its hand forced on government budget cuts.