[비즈한국] The Lee Jae-myung administration announced a supplemental budget proposal worth 30.5 trillion won on the 19th. This supplemental budget—the first under the Lee administration and the second this year—includes a "livelihood recovery support fund" ranging from 150,000 to 500,000 won to be distributed differentially to all citizens, as well as the write-off of long-term overdue debts for small business owners.
While the supplemental budget is aimed at economic recovery, concerns over fiscal soundness have intensified. Amid these concerns, critics point to the need to address the rapidly increasing tax exemptions and reductions that primarily benefit large corporations and high-income earners. This is because tax cuts for these groups are growing at a faster rate than the overall rate of tax expenditure growth.
The government deliberated and approved the proposal at a cabinet meeting chaired by President Lee Jae-myung on the 19th. The proposal is set to be submitted to the National Assembly on the 23rd, and given the ruling party's majority, it is expected to pass as proposed. Through this supplemental budget, actual increased fiscal spending will amount to 20.2 trillion won, which will be used for projects such as issuing livelihood recovery consumption coupons for all citizens and debt restructuring for vulnerable small business owners. The remaining 10.3 trillion won is for a "revenue adjustment," balancing the budget due to lower-than-expected tax revenue this year. To fund this supplemental budget, the government plans to issue an additional 19.8 trillion won in government bonds.
As the government moves to issue additional bonds for the supplemental budget, critics argue that tax expenditures—which provide tax breaks—must be reorganized to alleviate concerns about fiscal soundness. Because tax expenditures such as exemptions, income deductions, and tax credits are increasing rapidly every year, curbing them alone could provide significant relief to the national budget.
According to the government and the National Assembly, tax expenditures, which stood at 52.9 trillion won in 2020, rose to 57 trillion won in 2021 and surpassed 60 trillion won in 2022, reaching 63.5 trillion won. After breaking the 70 trillion won mark in 2024 at 71.4 trillion won, they are estimated to reach 78 trillion won this year, nearing the 80 trillion won threshold. The average annual growth rate over the past five years has reached 8.1%. By tax category this year, income tax expenditures are estimated to account for 61.7% at 48.1 trillion won, value-added tax for 16.9% at 13.2 trillion won, and corporate tax for 16.3% at 12.7 trillion won.
Analyzing the beneficiaries of these tax expenditures by category, individual tax benefits for this year are projected to reach 49.9 trillion won, accounting for 64.0% of the total. Corporate tax benefits are expected to account for 35.4% at 27.6 trillion won, with the remaining 500 billion won (0.6%) in uncategorized items. Among individuals, tax expenditures for low-to-middle income earners are expected to be 33.2 trillion won, which is double the level of tax expenditures for high-income earners (16.7 trillion won).
However, looking at the growth rate over the last five years, tax expenditures for high-income earners are rising faster than those for low-to-middle income earners. Tax expenditures for low-to-middle income earners grew from 23.9 trillion won in 2020 to 33.2 trillion won in 2025, with an average annual growth rate of 6.8%. This is lower than the average annual growth rate of total tax expenditures (8.1%).
On the other hand, tax expenditures for high-income earners grew slightly from 10.4 trillion won in 2020 to 10.5 trillion won in 2021, but then surged to 12.5 trillion won in 2022, 13.9 trillion won in 2023, 15.5 trillion won in 2024, and 16.7 trillion won in 2025, resulting in an average annual growth rate of 9.9%.
This trend was also evident among small and medium-sized enterprises (SMEs) versus large corporations. Tax expenditures for SMEs grew by about 2 trillion won annually from 12.9 trillion won in 2020 to 18.1 trillion won in 2023, but growth slowed in 2024 to 18.3 trillion won and 18.9 trillion won in 2025. Consequently, their average annual growth rate was 7.9%, lower than the overall growth rate of tax expenditures. In contrast, tax expenditures for "cross-shareholding restriction groups"—representing top-tier large corporate groups—were 2 trillion won in 2020 but are expected to reach 4.9 trillion won this year, marking an average annual growth rate of 20.2%.