This year, central government fiscal and tax expenditure has surpassed 800 trillion won. As government expenditure rises quickly, calls are growing to cut unnecessary, rigid mandatory expenditure and tax expenditure.
On the 12th, according to the National Assembly Budget Office's "Korea taxes," government expenditure combining fiscal expenditure and tax expenditure based on this year's budget plan totaled 808.5 trillion won. Fiscal expenditure is 728 trillion won (90%), and tax expenditure is 80.5 trillion won (10%).
If the first supplementary budget of the year (26.2 trillion won) is reflected, fiscal expenditure increases to 753 trillion won. That is up 11.8% from a year earlier.
The increase in government expenditure is due to the new administration's expansionary fiscal stance and the structure of rising mandatory expenditure from population aging. The basic pension, various welfare benefits, and the grant-in-aid (non-earmarked tax) are representative fixed expenditure items.
With the rise in government expenditure, controversy continues over rigid fiscal structures such as the education grant. The education grant is a resource the central government provides to metropolitan and provincial education offices, funded by 20.79% of national tax and part of the education tax.
Although the school-age population is declining, when tax revenue increases, the grants also rise automatically. This year as well, with additional tax revenue occurring, 4.7 trillion won in the grant-in-aid (non-earmarked tax) and 4.8 trillion won in the grant-in-aid (earmarked tax) for local education finance were automatically allocated.
Rhee Chang-yong, governor of the Bank of Korea, said at a press briefing of the the Bank of Korea's monetary policy committee on the 10th, "In a situation where economic support is needed through a supplementary budget, I question whether mechanically allocating excess tax revenue to elementary, middle and high school education budgets truly aligns with the purpose," noting, "A review is necessary."
Tax expenditure is also continuing to grow. This year's tax expenditure (80.5 trillion won) is expected to again set an all-time high following last year. Implemented in the form of tax credits and reductions, it produces effects similar to fiscal expenditure.
To manage tax expenditure this year, the government also introduced a policy of "principled termination upon sunset." According to the National Assembly Budget Office, tax expenditure items reaching sunset this year total 59 cases amounting to 4.9 trillion won.