NABO Estimates & Tax Issues (Issue. 10)
Published on February 28, 2020
Published by Estimates and Tax Coordination Division of the Estimates and Tax Analysis Office
I. Stocktaking of the Fiscal Demands of Legislative Bills Approved in 4Q 2019
Among the 288 legislative bills approved in the fourth quarter of 2019, there are 107 (37.2%) bills subject to fiscal enforcement that will affect national and local government finances. Implementation of these bills is expected to result in an annual revenue decline of 2.5207 trillion won and an annual expenditure increase of 2.5760 trillion won on average over the next five years (2020~2024), respectively.
Ⅱ. Analysis of the Major Policy Issues Regarding Estimations and Taxation
· In this report, in accordance with the established budget for 2020, additional fiscal demands for the 14 required welfare sector expenditure projects are estimated. An increase in the base pension benefit of the Basic Pension Scheme and the provision for free high school education are expected to require an additional annual fiscal demand of 2.3084 trillion won and 1.8633 trillion won on average, respectively.
·This report summarizes and reviews the main content and deliberation issues of the amended Tax Law for 2020, and estimates tax effects. Fifteen amendments in the Tax Law were made (December 2019) to expand tax exemptions, and increase the ratio of VAT and local consumption tax transfers, such as the extension of deductions for tax credits for productivity improvement facilities. Tax revenue is expected to decrease by a total of 1.4589 trillion won over the next five years (2020-2024).
·This report analyzes the impact of energy tax coordination on households, industry and the environment through the TAXSIM model of the National Assembly Budget Office. The policy implications also suggest that the role of energy taxation in the transition to a low-carbon economy is important and that a policy combination is needed to mitigate side effects of the transition.
·This report estimates the fiscal demand of a bill that promotes expansion of disaster relief funds and mandatory subscription to storm and flood insurance policies as the damage to housing and small businesses increased following the Gyeongju and Pohang earthquakes. When the bill is put into effect, the annual average additional fiscal demand is estimated to be 30.2 billion won.
·This report analyzes the characteristics of fiscal projects for child care support using the raw data of the Employment Insurance Scheme and estimates fiscal needs for the next 10 years. Analyses indicated that the number of men taking paternity leave is increasing, and a pattern of using shortened working hours following paternity leave was found to exist. In 2028, fiscal demand is estimated to be 1.7554 trillion won for paternity leave and 70.9 billion won for reduced working hours during child-care period.
Ⅲ. Estimations and Tax Trends in Korea and Abroad
·The national tax revenue in FY 2019 was 293.5 trillion won, down 116.1 billion won (△ 0.04%) from 2018, and 1.3 trillion won (△ 0.5%) lower than the 2019 budget.
·After the government's recent announcement of its Housing Market Stabilization Plans (December 2019), bills designed to strengthen (by national assemblyman Kim, Jeong-woo) and ease (by national assemblywoman Lee, Hye-hoon) the Comprehensive Real Estate Holding Tax were proposed. In 2020, the former is expected to generate tax revenues of 0.35 ~ 0.41 trillion won, while the latter is expected to generate – 0.01 trillion won.
·This report introduces the main content of the 2019~2049 Long-Term Budget Outlook report published by the US Congressional Budget Office (CBO). Comparison and analysis of baseline projections, over the next three decades, using fiscal trends of various scenarios are presented.
·Global digital companies do not have fixed establishments in countries of consumption, thus governments cannot tax these companies, resulting in tax avoidance. To resolve this issue, the OECD has proposed the temporary introduction of a digital service tax, and is untaking a long-term project, including apportioning taxation rights and amending fixed establishment regulations.
·At the end of 2019, the National Tax Service began to tax as an other income category the funds withdrawn in KRW by cryptocurrency users trading on domestic cryptocurrency exchanges. Similar taxation cases are also appearing in the US, Japan, and Australia.
·This report estimates the fiscal demands of introducing alternative military service. Over the next five years, the Military Manpower Administration's fiscal demand is estimated at 37.4 billion won for the establishment and operation of the Alternative Service Assessment Committee, on top of the fiscal demand of 128.2 billion won for the remuneration to alternative service agents and housing them at camps.
Ⅳ. Tax Indicators at a Glance
In this report, tax indicators such as the tax burden rate, the rate of national burden, the tax rate for major tax items, the ratio of tax revenue to nominal GDP, the ratio of local taxes to total taxes, national and local tax exemptions and reduction rates, monthly national tax income and progress rate, etc. can be viewed at a glance.