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Title Vol. 33 Analysis of the Korean Tax Expenditure Management System (English Edition)

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• Tax expenditure is a loss in national revenues caused by special taxation deviated from the general tax system with the purpose of providing financial support for taxpayers.
• The National Finance Act and the Restriction of Special Taxation Act define tax expenditure budget reports, restrictions on rebates or reductions of national taxes, and the tax expenditure performance management system as means to maintain tax expenditures at an appropriate size.
• The 2021 tax expenditures are expected to total KRW 56.8 trillion, up KRW 2.9 trillion from an estimated KRW 53.9 trillion in 2020.
• The ratio of national taxes rebated or reduced in 2019 stood at 13.9%, exceeding the legal boundary. The ratios for 2020 and 2021 are also expected to surpass the boundary.
• The tax expenditure budget report calculates actual tax expenditures and forecasts next year’s tax expenditures. The report provides basic information for tax expenditure management.
• Improving the accuracy of the tax expenditure forecast in the tax expenditure budget report is necessary for tax expenditure management.
• Management plans should be tailor-made for different management subjects in tax expenditure budget reports.
• Special taxation in-depth evaluations were carried out to manage tax expenditure performance reactively.
• Special taxation items, for which opinions of reduction or abolition were suggested as a result of an in-depth evaluation, should be managed thoroughly afterwards.
• Mid- to long-term macroscopic tax expenditure reduction plans must be devised to overcome the limitations of tax expenditure management that conducts special taxation in-depth evaluations mainly on individual items.

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