| Title | NABO Estimates & Tax Issues (Issue 17) | ||||
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| Views | 388 | Date | 2021-11-29 | ||
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NABO Estimates & Tax Issues (Issue 17) · (Review of fiscal demands of approved legislative bills in 3Q21) Among the 155 legislative bills approved in the third quarter of 2021, 62 (40.0%) have an impact on the finances of national and municipal governments. Regarding the 20 bills of which an estimation can be made, estimations concluded that the enforcement of the bills is expected to result in an annual decrease of 91.8 billion won in revenue and a 602.9 billion won increase in expenditure on average, over the next five years (2022~2026). · (3Q21 total revenue performance and trends) As of the third quarter, the cumulative total revenues reached 442.4 trillion won in 2021, marking an increase of 88.0 trillion won (24.8%) from the same period in the previous year (354.4 trillion won). Such performance was possible due to reasons such as the main tax items – income tax, corporate tax and value-added tax – continuing to record positive revenue numbers amid the ongoing recovery trend, and increased investment returns in social security funds such as the National Pension Service in line with the strong asset market. Ⅱ. Estimations & Taxation Analyses · (Estimation of Total Revenues in 2022)According to NABO estimations, total revenues for 2022 will reach 552.1 trillion won, 25.7 trillion (4.9%) higher than the 2021 estimations and 3.2 trillion won (0.6%) higher than the proposed budget. National tax revenues are expected to reach 340.9 trillion won, mainly led by increases in corporate tax and value-added tax as the economy recovers, whereas non-tax revenues are expected to reach 211.1 trillion won due to increased returns from fund management social security contributions. NABO estimations for the next five years (2021-2025) were 5.7 trillion won lower for national tax revenues and 20.5 trillion won higher for non-tax revenues, when compared with government estimations. · (Analysis of the 2021 Tax Code Revision)The government‘s 「2021 Tax Code Revision」 was focused on responding to the post-COVID era by securing next-generation growth engines, creating jobs, facilitating investment and consumption as well as supporting SMEs and the vulnerable classes. NABO estimated tax revenues for the next five years to decrease by 5.8 trillion won, which is 1.4 trillion higher than the government‘s estimated reduction of 7.2 trillion won. The cumulative incidence of tax burden would be as follows: -1.7 trillion won for the low and middle-income class, -0.6 trillion won for SMEs, -0.1 trillion won for the high income class and -3.3 trillion won for large conglomerates. In order to meet the purposes and objectives of tax support, the selection method of beneficiaries and the operation of the scheme should be made more practical. · (Analysis of the 2022 Total Tax Revenue Budget Plan) The 2022 total tax revenue budget plan submitted by the government stands at 548.8 trillion won, increasing 34.2 trllion won (6.7%) from the 2021 supplementary budget of 514.6 trillion won. The budget plan for national tax revenues is 338.6 trillion won, having incorporated the tax revenue increase owing to the post-COVID-crisis economic recovery. 210.2 trillion won has been earmarked for the non-tax revenue budget plan, incorporating factors such as the anticipated increase in social security contributions. The government should reinforce its management of national finances by taking into consideration the potentially weakened tax base since the COVID-19 crisis, and enhance the accuracy of the total revenue budget plan. Ⅲ. Current Issues in Estimations & Tax · (Trends in Korea‘s temporary interactive telemedicine) In Korea, while medical consultations must be conducted on a face-to-face basis between the physician and patient in principle, interactive telemedicine has been temporarily approved since February 2020 due to the COVID-19 crisis. People were more inclined to seek interactive telemedicine services especially at times and in locations where newly confirmed COVID-19 cases were high; particularly for chronic illnesses or respiratory illnesses which allow for convenient consultations via a non-face-to-face setting; in (upper-tier) general hospitals with cluster infection cases; and among those aged 70 and older. While interactive telemedicine continue to gain more attention, various concerns are being raised as to the security of the consultation. Therefore, discussion on such issues should be conducted. · (Introducing the medium-term fiscal outlooks of major economies: Australia)The Australian Treasury published the Economic and Fiscal Outlook report which forecasted the country‘s economic and fiscal conditions from FY2020 to FY2024. According to the economic outlook (FY2020-FY2022), the economic indicators are expected to recover the pre-COVID-19 levels during the forecast period owing to proactive implementation of economic support policies. As for the fiscal outlook (FY2020-FY2024), general government revenues and expenditures are both expected to increase from FY2022, while government debt is expected to continue to increase over the forecast period. · (Case studies of public pension reform in major economies: Canada)Canada introduced its public pension scheme in 1927, and currently runs the Guaranteed Income Supplement, Old Age Security and Canada Pension Plan. In order to achieve fiscal stability and better guarantee post-retirement income, pension reform was pursued in which participants “pay more and get more“ through a phased increase in the contribution rate and payment. Canada improved the sustainability of its pension finance through public pension reform, and is expected to maintain a stable fiscal management position over the next 75 years. Ⅳ. Tax and Fiscal Indicators at a Glance This section consists of charts and tables visualizing tax and fiscal indicators including total revenues and total expenditures; a timeline of fiscal balance; tax and non-tax revenues, the public’s burden ratio; the tax burden ratio; income tax rates; corporate tax rates as well as value-added tax rates. |
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