“High Interest Rates Slow Corporate Tax Revenue” – As of the end of October this year, national tax revenue decreased by 11.7 trillion won compared to the same period last year. According to the ‘October 2024 National Tax Revenue Status’ report released by the Ministry of Economy and Finance on the 29th, the national tax revenue last month was 38.3 trillion won, a decrease of 3 trillion won from the same month of the previous year.
Breaking it down by category, corporate tax revenue was tallied at 3.7 trillion won, a decrease of 5 trillion won year-on-year, influenced by the reduction in installment payments of mid-year taxes from small businesses. Income tax (9.1 trillion won) decreased by 2 trillion won due to a decline in capital gains tax, while value-added tax (VAT) increased by 4 trillion won, reaching 19.7 trillion won, driven by an increase in private consumption in the third quarter.
As a result, the cumulative national tax revenue collected from January to October this year amounted to 293.6 trillion won, down 11.7 trillion won (3.8%) compared to the previous year. The progress rate, indicating the collection performance as a percentage of the annual tax revenue target, stood at 79.9%, which is 8.8 percentage points lower than last year’s final figure (88.7%) and 9.1 percentage points below the recent five-year average (89.0%).
For the period from January to October, corporate tax revenue fell by 17.9 trillion won year-on-year to 58.2 trillion won. A Ministry of Finance official noted, “The burden of interest is higher than that of additional taxes, so corporate tax inflow is somewhat sluggish. However, if interest rates decrease, the corporate tax revenue situation is expected to improve next year.”
In the same period, income tax revenue increased by 2 trillion won to 94.1 trillion won, attributed to higher interest income tax due to high interest rates and increased employment and wage growth boosting labor income tax. VAT revenue increased by 6.1 trillion won to 80.2 trillion won, owing to increased consumption.
Assuming the same amount of taxes is collected in November and December as last year, this year’s national tax revenue is expected to reach 332.5 trillion won, which is 34.8 trillion won less than the original budget of 367.3 trillion won. The government had projected a deficit of 29.6 trillion won in its tax revenue re-estimation results released in September.
A Ministry of Finance official stated, “Unexpectedly, semiconductor equipment investment led to an increase in VAT refunds by 600 to 700 billion won in September. If as much tax is collected in November and December to offset this, it’s expected that the revenue will align with the re-estimated projections.”