Koo Yun-cheol, Deputy Prime Minister and Minister of the Ministry of Economy and Finance, said on the 10th that "it seems we can draw up a supplementary budget of an appropriate size without issuing Government Bonds." He cited as grounds the outlook that corporate tax and the security transaction tax will be collected more than initially expected as the semiconductor industry improves and the stock market becomes more active.
There is speculation that the government could pursue a 20 trillion won supplementary budget, but projections for excess tax revenue vary widely, from as little as 6 trillion won to as much as 28 trillion won. Whether a supplementary budget can be done without issuing Government Bonds will be decided by the actual size of the excess tax revenue.
◇ Of the most recent 18 supplementary budgets, 4 were done without issuing Government Bonds thanks to excess tax revenue
There have, in fact, been cases of a "supplementary budget without issuing Government Bonds." Since the National Finance Act was enacted in 2006, the government has compiled a total of 18 supplementary budgets, and in 7 of those, it did not issue additional Government Bonds. In 4 of the 7, it used excess tax revenue. In May 2022, under Choo Kyung-ho, then Deputy Prime Minister and Minister of the Ministry of Economy and Finance, the government implemented a total 62 trillion won supplementary budget, using 53 trillion won in excess tax revenue as funding. At the time, it even repaid 7.5 trillion won of Government Bonds through expenditure restructuring.
At this point, a supplementary budget financed by issuing Government Bonds is also a burdensome option for the government. On the 9th, the yield on three-year Treasury bonds surged to 3.42% per year, the highest level in 1 year and 9 months since June 2024. In this situation, if the government even prints deficit Government Bonds, Treasury yields could rise further, making it harder for the private sector to raise funds.
A "supplementary budget without issuing Government Bonds" depends on how much this year's tax revenue exceeds the target. The government has not yet disclosed the size of the excess tax revenue. A Ministry of Economy and Finance official said, "A precise tax revenue re-estimate can only begin in April, when we can see corporate tax payment results." This is because corporate taxes based on last year's performance are due by Mar. 31.
◇ Outlook favors a "20 trillion won supplementary budget"… if excess revenue falls short, Government Bonds will be needed
Research institutions forecast this year's excess tax revenue at anywhere from a minimum of 6 trillion won to a maximum of 28 trillion won, a wide gap. The government's budgeted national tax revenue for this year is a total of 390.2 trillion won. ▲ Income tax 132.1 trillion won ▲ Corporate tax 86.5 trillion won ▲ Value-added taxes 86.6 trillion won ▲ Other tax items 85 trillion won.
The National Assembly Budget Office projected excess tax revenue at 6 trillion won. It said income tax could bring in an additional 4.6 trillion won and corporate tax 900 billion won. In Oct. last year, the office noted, "We judged that the economic growth rate would be higher than the government expected, improving income conditions," and "we also estimated a larger effect from increased corporate operating results in the second half of last year and the corporate tax rate hike."
Hana Securities projected excess tax revenue at 9 trillion won. In Jan., Hana Securities researcher Park Jun-woo said, "Corporate tax could bring in an additional 8 trillion to 9 trillion won," adding, "If the supplementary budget is set at 14 trillion won, more than two-thirds of the funding could be covered by excess tax revenue."
Recently, there have also been projections that excess tax revenue could exceed 20 trillion won. Kang Seung-won, a researcher at NH Investment & Securities, said, "This year's corporate tax could come in about 25 trillion won more than the previous peak year of 2022 (87.8 trillion won)." In addition, Choi Ji-uk, a researcher at Korea Investment & Securities Co., issued a report saying "tax revenue could increase by about 30 trillion won from corporate tax alone compared with last year." If both forecasts pan out, excess tax revenue could reach 26 trillion to 28 trillion won.
The financial investment industry expects the government to compile a supplementary budget of up to 20 trillion won. If actual excess tax revenue falls well short of that, a supplementary budget without issuing Government Bonds would be difficult even with large-scale spending restructuring.