S. Korea's fiscal deficit narrows in Q1 on higher tax revenue

South Korea’s fiscal deficit narrowed in the first quarter despite heavy fiscal spending to fight Covid-19 as tax revenue increased from business recovery and asset trade boom.

The Korean government ran a consolidated deficit of 30.1 trillion won ($26.9 billion) in the January-March period, down 15.2 trillion won from a year ago, according to the Ministry of Economy and Finance report released on Tuesday.

Operational fiscal deficit, or national income minus spending and social security funds like pension and employment insurance that better shows the actual fiscal status, came to 48.6 trillion, off 6.7 trillion won from a year earlier.

Tax revenue increased 6.4 trillion in the first quarter from a year earlier to 28.6 trillion won in the first quarter. Corporate tax revenue amounted to 20.2 trillion won, up 4.8 trillion won on year, as businesses generated higher income on exports recovery. The Kospi-listed companies with fiscal year ending in December earned 19.8 percent more in operating income than the previous year.

Capital gain tax revenue expanded by 3 trillion won after real estate trades grew 1.7 percent on year. General income tax collection from mom-and-pop businesses rose by 1.2 trillion won and traffic tax revenue from oil refiners by 4.4 trillion won as tax payment grace period ended.

Tax collection rate was 31.3 percent, 6.9 percentage points higher than a year earlier.

Non-tax revenue increased 1.5 trillion won to 10.1 trillion won on growth in central bank’s reserves and postal agency’s income.

The Korean government’s revenue totaled at 152.1 trillion won in the first quarter after adding 32.6 trillion won over the year.

Fiscal spending came to 182.2 trillion won, up 17.4 trillion won on year.

Budget execution rate reached 31.8 percent, up 2.1 percentage points on year, as the government moved aggressively with its Covid-19 relief programs.

As of end of March, 3.3 trillion won has been doled out to small merchants and 500 billion won to self-employed including freelancers and gig workers. Job seeker’s allowance amounted to 3.2 trillion won in the first quarter, up 700 billion won from a year earlier.

Government debt stood at 862.1 trillion won as of end of March. The Korean government issued 50.4 trillion won worth of bonds in the first quarter, or 27 percent of this year’s ceiling of 186.3 trillion won at an average interest rate of 1.59 percent.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]