[비즈한국] During a Cabinet meeting on August 27, President Yoon Suk-yeol emphasized that fiscal soundness is the core principle of his administration's financial policy while approving the 2025 budget proposal. He reiterated his commitment to reducing the national debt that ballooned during the Moon Jae-in administration by tightening the government's belt. However, with the ongoing tax revenue shortfall, some point out that simply cutting government spending will not be enough to achieve fiscal soundness.
A pattern of "front-loaded, back-weak" tax revenue (where revenue in the second half is lower than in the first) has continued consecutively, and with this trend difficult to avoid this year, a tax shortfall for the third consecutive year is now certain. Concerns are also being raised that the tax revenue projected by the government in next year's budget will be insufficient to fill the gap created over the past three years.
On the 27th, President Yoon Suk-yeol presided over a Cabinet meeting at the Presidential Office in Yongsan-gu, Seoul, to approve the '2025 Budget Proposal' and the '2024-2028 National Fiscal Management Plan.' The government's total expenditure for next year is set at 677.4 trillion won, an increase of 20.8 trillion won (3.2%) from this year (656.6 trillion won). The national tax revenue target was set at 382.4 trillion won, an increase of 15.1 trillion won from this year (367.3 trillion won). President Yoon stated, "Fiscal soundness is the major principle that our government has upheld while preparing three consecutive budgets," adding, "The budget for next year also contains the government's intense deliberation and effort for efficient fiscal management."
Although the government's budget growth rate has been adjusted upward from this year's record low of 2.8%, it has remained around 3% for two consecutive years, leading to assessments that, as President Yoon stated, the austerity fiscal stance remains clear. However, with tax conditions being poor—including the expectation of a third straight year of tax shortfalls—the reality is that reaching fiscal soundness through austerity alone is not easy.
Since 2021, South Korea's tax revenue has shown a trend where it decreases as the year progresses toward the second half. Since 2022, this decline has led to "tax shortfalls," where the total annual revenue falls short of the budget target. In the first half of 2021, tax revenue was 181.8 trillion won, accounting for 52.8% of that year's total (344.1 trillion won). Second-half revenue was 162.3 trillion won, a decrease of 19.5 trillion won compared to the first half. While revenue did decline in the second half, the total annual revenue still exceeded the budget (314.3 trillion won) by 29.8 trillion won.
However, the "front-loaded, back-weak" trend began causing tax shortfalls starting in 2022. First-half tax revenue in 2022 was 218.3 trillion won, accounting for 55.1% of that year's total revenue (395.9 trillion won). It also represented 55.0% of the budget (396.6 trillion won), appearing as though revenue would exceed the target. However, as second-half revenue dropped to 177.7 trillion won—a decrease of 40.6 trillion won compared to the first half—the total annual revenue fell 700 billion won short of the budget.
The situation was even worse in 2023. First-half tax revenue in 2023 was 178.6 trillion won, only 44.6% of the budget (400.5 trillion won). Second-half revenue was 165.5 trillion won, a decrease of 13.1 trillion won from the first half, resulting in a total annual revenue of only 344.1 trillion won. Consequently, last year's tax shortfall hit a record high of 56.4 trillion won. The tax deficit, already poor in the first half, did not recover in the second half but rather worsened, expanding the scale of the shortfall.
This trend is expected to continue this year. Tax revenue for the first half of this year was 168.6 trillion won, which is only 45.9% of the budget (367.3 trillion won). Following last year, the government has failed to collect even half of the annual target in the first half again this year. Even if the same amount of tax is collected in the second half as in the first, a 30 trillion won tax shortfall is inevitable.
However, the outlook for the second half is also not bright. The National Assembly Budget Office noted that "it is difficult to expect a rebound in the sluggish tax revenue trend of the first half in the second half," citing the slowdown in domestic demand and imports as factors worsening second-half tax conditions. It further stated, "Given the revenue conditions for the second half, there is a risk of a significant tax shortfall for 2024."