S Korea Says Tax Revenue Conditions to Remain Tough

South Korea will continue to face taxation revenue troubles in the near term, a finance ministry official said last week, underscoring President Park Geun-hye’s challenges in expanding social welfare spending while reducing the government’s deficit.
“When looking at our tax revenue conditions, we expect them to be continuously difficult,” Jeong Eun-bo, deputy finance minister, said at a seminar hosted by the Federation of Korean Industries.
“Demand for funding is explosively increasing while increasing taxes can only be limited due to low birth rates and an ageing population.”
The Park administration faces the tough task of reducing the fiscal deficit while living up to campaign pledges to increase the social safety net to support a rapidly ageing population.
An overly optimistic 2013 economic growth forecast set by the previous administration has left the government with what it projects will be a tax revenue shortfall of up to 8 trillion won ($7.5 billion) for the year.
As a result, Park’s government was forced to back away from a goal to balance the budget within her five-year term and scaled back the monthly subsidy programme for the elderly.
Although finance ministry officials say they were conservative in their 2014 projections for 3.9 percent economic growth and 218.5 trillion won in tax revenue, some analysts say such projections remain overly optimistic.
“The growth projection for next year in of itself won’t be easy, and tax revenue for next year will likely be undercut by the weak property market as well as the fact that much of next year’s tax revenue will be based on this year’s economic activity,” said SK Securities analyst Yum Sang-hoon.               Reuters