Fiscal Year 2019 Total Revenue Settlement Analysis
Published on Aug., 7, 2020
Published by Tax Policy Analysis Division 1, Estimates and Tax Analysis Department
In 2019, the Korean economy recorded a growth rate of 1.1%, which was lower than the previous year (3.4%), due to increased internal and external uncertainties.
With the economy being more sluggish than originally expected, total revenues recorded for FY2019 were 473.1 trillion won, which was 3.3 trillion won less than the budget, as national tax revenues decreased by 0.1 trillion won from the year before.
In 2019, national tax revenues decreased by 0.1 trillion won (△0.04%) from 2018 (293.6 trillion won) due to economic factors such as lethargic domestic demand and a slow business climate, as well as institutional factors such as earned income tax credit (EITC) expansion and local consumption tax rate increases.
Meanwhile, non-tax revenues increased by 8.1 trillion won (4.7%) from 2018 (171.2 trillion won) due to increases in social security contributions revenues and treasury loan & sub-lease loan.
Amid the continued stagnant flow of national tax revenues, this year's economic shock from COVID-19 is becoming a crisis, worsening the decline in revenue flows.
As uncertainties across the economy intensify, it is difficult to predict the severity and duration of the impact that the economic shock will have on revenue streams. Given these fiscal dilemmas, it is more imperative than ever to ascertain future revenue conditions based on 2019 revenue settlement of accounts and find implications for the review of budget revenues for next year.
This report was prepared with the aim of identifying implications for review of this year's fiscal management and next year's budget revenues with the settlement of accounts for total revenues for FY2019 submitted by the Administration. To this end, total revenue performance in 2019 was analyzed by detailed tax item. The in-depth analysis of national tax revenues was conducted to ascertain the causes of either the increase or decrease of each tax item. Simultaneously, the effect of expanding the EITC and the reorganization of the Comprehensive Real Estate Tax were analyzed to suggest future policy directions. For the analysis of non-tax revenues, analysis by item and the settlement of accounts of the eight major social insurances were closely reviewed, and areas of improvement were presented to reduce the errors of non-tax revenues that have persisted since 2013.