ED Tax revenue blues

The government’s national tax revenue is expected to hit a record high this year despite slower economic growth. During the first 10 months of the year, the government collected 215.7 trillion won in taxes, up 12.3 percent from a year earlier. The accumulated taxes are 92.7 percent of the government’s target for this year, and the Ministry of Strategy and Finance forecasts this year’s tax revenue to surpass 240 trillion won for the first time.

The tax revenue boom comes after Korea suffered a tax revenue shortfall for three years in a row since 2012. Last year, Korea enjoyed a surplus of 2 trillion won and the surplus could swell to 8 trillion won this year.

What’s embarrassing is that the tax revenue increase has resulted from the prolonged economic downturn.

Corporate taxes, for example, surged 7.8 trillion won in the January-October period. But that was thanks to companies’ painful cost-cutting measures and a plunge in the prices of raw materials, which enabled them to increase profitability and pay more taxes. In fact, the combined net profit of 511 companies listed on Seoul’s main bourse amounted to 68 trillion won in the first nine months of the year, up 10 percent from a year ago.

Between January and October, the government also collected 60.2 trillion won in value-added taxes, which exceeded its 59.8 trillion won target for all of 2016. Auto sales in Korea surged in the first half of this year, boosted by the government’s temporary tax cut on passenger cars.

The tax revenue bumper crop is not bad in light of fiscal soundness. But it is not necessarily good for the government to collect more taxes. Had the government predicted this situation accurately, it could have used fiscal policy more actively to rejuvenate the slowing economy and address the worsening unemployment problem.

Capitalizing on the increased tax revenue, more experts call for drawing up a new supplementary budget early next year. Given the constrictive nature of the 2017 budget and America’s imminent interest rate hike, arguments for more spending make sense. Needless to say, policymakers should focus on creating jobs and improving the people’s livelihood.