Since the outbreak of the COVID-19 pandemic, ordinary households' concerns have deepened amid the triple distress of soaring housing prices, rising interest rates, and rapid inflation. In contrast, banks and the government have benefitted from the ongoing economic difficulties, aggravating polarization among economic players. Most households are reeling from heavier financial burdens resulting from higher interest rates. On the other hand, five major banks' interest earnings totaled 31 trillion won ($26.3 billion) in the first nine months of the year; and the government is expected to rake in an additional 40 trillion won in tax revenue this year.
Most low- to middle-income families saw their disposable income drop amid the protracted pandemic. On top of this, the interest rates on mortgages and unsecured loans jumped to the 3 percent to 4 percent range, increasing their financial burden. In October, inflation also jumped above 3 percent, the highest in a decade, making it harder for families to make ends meet. However, commercial banks enjoyed soaring interest income, helped by rising market interest rates and widening interest margins. They have even refrained from offering preferential interest rates to maximize their profit.
The tax authorities are no less happy. The National Assembly Budget Office has recently estimated the government's tax revenue for 2021 at 323 trillion won, 8.7 trillion won more than the 314.3 trillion won projected in July when the administration drew up a second supplementary budget. The revised estimate also represented an increase of 31.5 trillion won projected when coming up with the main budget. Noting that there is room for more tax receipts, some experts predict the additional revenue could exceed 40 trillion won. Officials attribute the excess revenue to an earlier-than-expected economic recovery and overheated asset markets. Considering it is difficult to spend the unexpected revenue at the right time and place, the authorities can hardly avoid criticism.
The Moon Jae-in administration should spend the excess tax revenue on repaying the national debt and helping to stabilize the livelihoods of financially vulnerable businesses, including micro-enterprises and self-employed people. The financial industry also must come forward to narrow the economic gulf by using part of their interest income to support those who are financially strapped.