The government is maintaining its stance against a second supplementary budget for this year, despite a larger-than-expected tax surplus that has reignited discussions about a potential fall supplementary budget. While the tax revenue conditions are favorable for such a budget, the key challenge lies in establishing a legal and policy justification.
According to the Ministry of Planning and Budget, the government has officially stated that there are no plans for a second supplementary budget. This decision is based on the fact that a supplementary budget has already been established this year and the need to manage fiscal soundness. However, the scale of the tax revenue increase has exceeded initial expectations, prompting speculation about a 'fall supplementary budget' among political circles and within the government.
The Ministry of Finance reported that cumulative national tax revenue from January to May this year reached 199.9 trillion won, an increase of 27.5 trillion won compared to the same period last year. This increase is attributed to higher corporate and value-added taxes. If this trend continues through the end of the year, there is potential for a surplus of tens of trillions of won.
Should the surplus materialize, discussions about additional fiscal measures are expected to intensify. Recently, President Lee Jae-myung highlighted the need for securing graphics processing units (GPUs) to enhance artificial intelligence (AI) competitiveness, suggesting the possibility of additional fiscal input.
However, there are significant challenges to actually formulating a supplementary budget. The National Finance Act stipulates that supplementary budgets can only be established in response to unpredictable situations such as war, large-scale natural disasters, economic recessions, or mass unemployment. Simply having a surplus is not sufficient legal grounds for a supplementary budget.
The 'war supplementary budget' executed in the first half of this year was justified by the need to address high prices and inflation resulting from the U.S.-Iran conflict. However, as the situation has stabilized, using this as a basis for a new supplementary budget has become more difficult. Observers suggest that the government will likely seek alternative policy and economic justifications.
Some analysts believe that recent economic trends could serve as a justification for a supplementary budget. The recovery in the job market is slowing, and the prolonged downturn in the construction and manufacturing sectors is raising concerns. The slow pace of domestic recovery and the widening disparities among sectors and classes, referred to as 'K-shaped polarization,' are also cited as factors supporting the need for a supplementary budget. The decline in construction investment and the contraction in some manufacturing sectors are impacting local economies and job markets. Additionally, the business conditions for small businesses and self-employed individuals have not fully recovered.
Conversely, there are calls for a cautious approach to any supplementary budget. Even with a tax surplus, prioritizing national debt management and fiscal soundness is essential. Given the recent large-scale fiscal expenditures, the potential impact of an additional supplementary budget on inflation and national debt must also be carefully considered. Furthermore, it is necessary to assess whether the increase in tax revenue is a temporary phenomenon or indicative of structural changes.
Woo Seok-jin, a professor of economics at Myongji University, stated, "With the high oil price phase coming to an end and this year's nominal growth rate expected to reach double digits, it is difficult to view the situation as an economic crisis. If a supplementary budget is pursued, funding should be allocated to gradual projects to stimulate the economy, but efficient resource allocation is not feasible in the current context. It would be better to establish funds for future use."
* This article has been translated by AI.
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