With the National Assembly set to begin deliberations on tax laws this month, concerns are growing over a weakening tax base as tax cut bills pour in across the political spectrum. As the government shifts to an expansionary fiscal stance to boost the economy, there are no plans to increase revenue, only more bills that would reduce it. Experts warn that the political sphere's "tax cut competition" is threatening fiscal soundness and say that discussion on bolstering the revenue base is more urgent than short-term vote seeking.
According to the National Assembly's bill information system on the 4th, more than 30 amendments to the Act on Restriction on Special Cases Concerning Taxation were introduced over the past month. Most are tax cut plans that expand tax exemptions and reductions or extend sunsets. Many would revive or widen special schemes the government decided to end, including value-added taxes refunds for foreign tourists, input tax credits on secondhand transaction purchases, and tax support for youth savings and childbirth incentives.
Park Jeong-hyeon of the Democratic Party of Korea introduced a bill to extend for three years, until the end of 2028, the special value-added taxes refund for foreign tourists on medical services for cosmetic procedures. The government had said it would end the temporary scheme this year, but Park argued, "An extension is unavoidable to maintain competitiveness in medical tourism." If the bill passes, the National Assembly Budget Office projected a revenue decline of 703 billion won in 2026–2029.
Ahn Do-geol of the Democratic Party of Korea proposed an amendment to expand tax benefits in the used-phone market by applying a special input tax credit to devices acquired by "safe transaction operators" for used mobile communication devices. The measure is intended to ease the burden on the rapidly growing secondhand transaction market, but widening the scope of the special case also raises concerns about reduced revenue.
Lee In-seon of the People Power Party introduced a bill to create a temporary special case that reduces acquisition and property taxes during business restructuring in the petrochemical industry, which faces a crisis, while Lee Hun-gi of the Democratic Party of Korea proposed a bill allowing a 30% corporate and income tax credit for corporations that pay childbirth incentives to employees.
Tax specials aimed at younger people also followed. Jeong Tae-ho of the Democratic Party of Korea proposed exempting interest income from youth future savings accounts from taxes, and Park Hong-geun of the Democratic Party of Korea led a bill to stimulate consumption by allowing a 30% deduction from earned income for credit card spending at restaurants.
As bills expand tax relief targets across industries, generations, and regions or extend sunsets, they increasingly clash with the Ministry of Economy and Finance's policy direction aimed at securing revenue. In particular, with the government implementing expansionary fiscal policy to stimulate the economy, a weakening revenue base is threatening fiscal sustainability.
The government shifted from austerity to expansion, increasing next year's total expenditure to 728 trillion won. Budgets for research and development (R&D) and industry and energy rose 19.3% and 14.7%, respectively, and the welfare and employment budget also expanded by more than 20 trillion won to 269.1 trillion won.
However, the national tax revenue growth rate is only 2%, leaving the revenue base still fragile. Although the government carried out a 27 trillion won expenditure restructuring, it effectively filled finances through Government Bonds issuance and internal transactions between accounts.
Ultimately, if a revenue base to support expansionary fiscal policy is not secured, there are concerns that tax shortfalls could become structurally entrenched. The government says it will secure funds through restructuring of tax expenditures, expansion of local government tax, and issuance of Government Bonds, but each faces clear limits. Restructuring saves only several trillion won a year, and expanding local government tax entails significant imbalances due to regional disparities.
In a report in September, the Institute for Fiscal Studies noted, "We agree with the direction of economic recovery through expansionary fiscal policy, but we must also consider the lowered tax burden ratio and worsening fiscal soundness indicators."
Experts also expressed concern that tax relief is increasing indiscriminately in step with the political calendar, and pointed out that bolstering the revenue base is urgent.
Woo Seok-jin, an economics professor at Myongji University, said, "Lawmakers are rolling out relief bills reflecting the demands of each interest group, but tax specials are effectively fiscal expenditure in a situation where the revenue base is weak," adding, "We need to strengthen preliminary feasibility reviews of the special taxation act to boldly weed out ineffective relief and broaden the revenue base by, for example, aligning tax bases with actual values."
Kim Jeong-sik, an economics professor at Yonsei University, said, "Even if the nominal tax rate is raised, the effective tax rate can actually fall if various deduction and relief systems are maintained," adding, "If relief systems expand excessively, tax shortfalls will be unavoidable, so the deduction and relief systems must be reviewed again."