Corporate tax revenue likely to fall short

Corporate tax revenue likely to fall short. April. 12, 2025 07:39. by 세종=송혜미 기자 1am@donga.com.
After two straight years of large-scale tax revenue shortfalls in 2023 and 2024, prospects for a rebound to refill government coffers this year appear dim. Sluggish domestic demand and a bearish stock market are shrinking revenue from related taxes, while corporate tax income is also expected to come in below projections amid a broader economic slowdown.

So far, what has helped sustain South Korea’s deteriorating fiscal health is income tax paid by salaried workers. With corporate tax revenue falling and tax evasion on the rise among celebrities, YouTubers and influencers, critics say the burden is increasingly falling on wage earners with so-called “glass wallets.”

According to the Ministry of Economy and Finance on Thursday, the government collected 61 trillion won ($45 billion) in national taxes through February. That’s about 16% of the 382.4 trillion won ($281 billion) in tax revenue the government aims to collect this year. Over the past five years, an average of 17% of annual revenue was collected during the same period — indicating a slower pace this year.

Revenue from value-added tax, which is closely linked to economic activity, fell to 16.8 trillion won, down 700 billion won from a year earlier due to weak consumer spending. Securities transaction tax revenue also plunged to 600 billion won from 1 trillion won as trading volume in domestic markets declined.

The main pillar of tax revenue so far has been income tax from salaried workers. Earned income tax collected through February totaled 18.2 trillion won, or 29.8% of total tax revenue, up 2.6 trillion won from the same period last year. Officials attributed the rise to an increase in performance-based bonuses paid out early in the year.

Still, the government cautioned that it is too early to gauge the full-year tax outlook, noting that key tax payments, including corporate taxes, are usually made in March and April. As of February, corporate tax revenue stood at 4.2 trillion won — up 700 billion won from a year earlier.

Despite the slight increase, a third consecutive year of shortfalls remains likely. In both 2023 and 2024, lower-than-expected corporate tax revenue was the main culprit. Adding to the pressure on public finances is mounting tax evasion by high-income earners, such as celebrities, who report large incomes but often fail to pay their full share.