The government said on the 13th that it held the National Fiscal Strategy Meeting and "will push to create the Future Response Fund as a strategic investment platform to use the large-scale increase in tax revenue for future-oriented productive expenditure." It added, "We will deposit additional tax revenue that exceeds the long-term trend into the fund and concentrate investment in four areas: the young generation, growth engines, regions, and talent."
This is the first time the government has officially released how and in what fields it will use tax revenue collected more than expected due to the semiconductor boom. But experts noted concerns such as "the very concept of additional tax revenue that exceeds the long-term trend is abstract," "it conflicts with the National Finance Act, which stipulates that excess tax revenue should first be used for a supplementary budget and Government Bonds repayment," and "the fundamental principles of the national finances could be shaken."
◇ Is tax revenue collected above the long-term trend "additional tax revenue," not "excess tax revenue"?
As the government expects more tax revenue than previously forecast in the process of drafting next year's budget bill, it initially called it "excess tax revenue," but recently began calling it "additional tax revenue." The term excess tax revenue appears in the National Finance Act, which defines the principles of national finances, but the term additional tax revenue does not.
Earlier, Ryu Deok-hyeon, presidential secretary for fiscal planning, said on the 7th, "The Future Response Fund (to be created with additional tax revenue) should be newly established in the form of a special law," adding, "We will share some details through the National Fiscal Strategy Meeting."
However, even at the National Fiscal Strategy Meeting that day, the specific details of the Future Response Fund special law—which could be seen as an "additional tax revenue special law"—were not disclosed. The government instead used the phrase "additional tax revenue that exceeds the long-term trend." A presidential official also said on the 6th, "Additional tax revenue is the amount exceeding the long-term trend."
The problem is that this concept is abstract. While the government refers to a "long-term trend in tax revenue," it has not explained how it determines the trend across how many years of revenue. It also did not present criteria for how much revenue must exceed the trend to be considered additional tax revenue, even as it describes it as the "excess over the long-term trend."
Kim Woo-cheol, a professor of tax accounting at the University of Seoul, said, "The government's move to conceptualize a temporary increase in tax revenue with a term (additional tax revenue) and then fund it for permanent expenditure does not align with the principles of fiscal management."
◇ Clash with the National Finance Act, which sets targets and order for spending excess tax revenue?
Some say the government needs to first resolve conflicts with the National Finance Act if it intends to deposit additional tax revenue into the Future Response Fund and invest in four areas: the young generation, growth engines, regions, and talent.
Article 90 of the National Finance Act stipulates that when a world surplus occurs due to excess tax revenue expected in that year, it must be spent in the order of settling local allocation tax and local education finance grants, repayment of public funds, and repayment of Government Bonds. Accordingly, during the semiconductor booms of the 1990s and 2000s, the government used excess tax revenue for grant settlements, Government Bonds repayment, and drafting a supplementary budget.
The government is reportedly reviewing including an exception clause in the Future Response Fund special law that would allow additional tax revenue to be put into the fund "notwithstanding the National Finance Act." A legal professional said, "Even if such a clause is included in a special law, it creates the problem of retroactively reclassifying resources that would already be categorized as excess tax revenue under the National Finance Act into additional tax revenue and diverting them to the Future Response Fund."
Kang Sung-jin, an economics professor at Korea University, said, "Past administrations generally tried to abide by Article 90 of the National Finance Act," adding, "Since the Moon Jae-in administration, it has not been observed, and now they are proposing to create a law that would not observe it at all."
In political circles, some say "the government may avoid disclosing specifics until the special bill is submitted to the National Assembly to steer clear of controversy over additional tax revenue."
A researcher at a state-run think tank said, "As criticism emerged that it conflicts with the National Finance Act, they laid the groundwork by changing the term from excess tax revenue to additional tax revenue and may be trying to insert an exception clause into the special law."