Korean government likely to see $17 bn fall in 2023 corporate tax revenue

[Photo by MK DB]

The South Korean government is expected to collect 23 trillion won ($17 billion) less in corporate tax revenue this year than the estimated amount as local companies face worsening profitability due to the slow economy.

According to the corporate tax revenue forecast by the Federation of Korean Industries (FKI) upon request by Maeil Business Newspaper on Tuesday, the corporate tax revenue is projected to stand at about 81.4 trillion won this year, down 21.4 percent from a year ago.

The projection is 23.6 trillion won short of the government’s initial projection of 105 trillion won.

The FKI established a regression model between the January-March corporate tax revenue and annual figure over the past 10 years from 2013 to 2022 released by Statistics Korea.

The FKI then estimated this year’s corporate tax revenue by reflecting the January-March collected earnings.

The decline in corporate taxes led to a decline in overall tax revenue.

According to the Ministry of Economy and Finance, national tax revenue in the first four months of this year stood at 134 trillion won, down 33.9 trillion won from the same period a year ago.

The fall in corporate tax revenue is attributed to weak corporate earnings.

The FKI analyzed the performance of 29,614 companies subject to external audits last year, excluding financial firms, and their operating income and net profit before taxes fell by 10 percent and 20.1 percent in one year.

The government’s overall spending, in the meantime, is expected to exceed 700 trillion won for the first time this year, on a surge in fiscal and tax expenditures.

According to data from the finance ministry and the National Assembly Budget Office, total government spending this year is expected to reach 708.3 trillion won, including 69.3 trillion won in tax expenditures.