South Korea’s tax revenue saw a sharp decline in January 2023, with the government reporting a drop of 6.8 trillion won ($5.14 billion) from the same month in the previous year. The Ministry of Economy and Finance attributed the fall to the sluggishness of both the real estate market and the stock market.
According to the government data released on Monday, the country’s tax collection fell to 42.9 trillion won in January, compared to 49.7 trillion won a year ago. This drop in tax revenue was also partly due to a significant increase in tax collection in January 2022 when the government collected deferred taxes from businesses that had postponed their payments during the COVID-19 pandemic.
Income tax collection in January decreased by 800 billion won to 12.4 trillion won, as the government levied less tax on capital gains amid a slump in the local housing market due to higher borrowing costs. Similarly, corporate tax collection decreased by 700 billion won to 2.1 trillion won, reflecting a high comparative base. Additionally, the collection of value-added tax (VAT) decreased by 3.7 trillion won to 20.7 trillion won.
Tax collection on stock trading also saw a decline of 400 billion won to 800 billion won due to the sluggishness of the stock market.
The South Korean government’s tax revenue is an essential source of funding for its ambitious infrastructure development plans, including investments in renewable energy, digitalization, and transportation. The decline in tax revenue in January could pose a challenge to the government’s efforts to stimulate the economy and address income inequality through social welfare programs.