The South Korean government is focusing on the Future Response Fund, which is expected to exceed 200 trillion won as this year's surplus tax revenue is projected to reach 63.2 trillion won. Both the government and the Bank of Korea recognize the need to utilize the increased tax revenue for public welfare areas such as housing, employment, and financial support for citizens. However, they also plan to allocate some of the surplus to reduce national bond issuance if interest rates rise excessively.
According to the Ministry of Economy and Finance's revised estimates released on September 30, national tax revenue is expected to total 478.6 trillion won this year, an increase of 63.2 trillion won compared to the supplementary budget. This surge is attributed to improved performance in the semiconductor sector and a favorable stock market.
The key question is how to allocate the increased tax revenue. While there are discussions about using part of the surplus to bolster the Future Response Fund, which is set to be established at 162.3 trillion won next year, not all of the surplus will automatically be transferred to the fund.
The bill submitted to the National Assembly for the Future Response Fund calculates the surplus based on domestic tax revenue. The revised estimates indicate that domestic tax revenue is expected to increase by 56.2 trillion won compared to the supplementary budget.
If the increase in domestic tax revenue of 56.2 trillion won is simply added to the existing fund creation plan, the total would amount to 218.5 trillion won. However, this calculation assumes that all additional funds will be transferred, which may vary based on the actual amounts allocated and the distribution scale.
Before expanding the fund, legal foundations and policy decisions are necessary. The proposed legislation for the Future Response Fund and amendments to the National Finance Act still require parliamentary discussion. The previously submitted bill allows for the transfer of surplus tax revenue to the fund, but it has not been confirmed that the entire amount will be automatically allocated.
The government stated that it is currently in discussions with relevant ministries regarding the utilization of surplus tax revenue. Since the revised estimates are projections for tax revenue to be collected by the end of the year, the actual amounts available for allocation may change based on final collection results.
The government's proposed direction for utilizing the surplus focuses on public support and reducing polarization. Deputy Prime Minister and Minister of Economy and Finance Lee Hyung-il emphasized the need to strategically use surplus tax revenue in line with economic conditions during the expanded macro-financial meeting.
Stabilizing the national bond market is also a variable in the allocation of funds. Deputy Prime Minister Lee assessed that the rise in domestic bond rates is influenced by global interest rate increases and domestic factors. He explained that if rates rise excessively, emergency buybacks and a reduction in national bond issuance using part of the surplus tax revenue could be implemented as market stabilization measures.
Reducing planned national bond issuance by utilizing surplus tax revenue could lower the government's need for additional borrowing. While this approach differs from repaying already issued bonds, it is a financial management tool that can be considered alongside fund accumulation and increased new expenditures.
The relationship with local finances remains a contentious issue. Local governments have expressed concerns that adjustments to the parameters used to calculate local allocation taxes during the creation of the Future Response Fund could result in reduced funding compared to previous calculations. The government has stated its commitment to maintaining local support through increased regional investments, indicating that discussions on the fund's accumulation scale and local revenue distribution methods will take place during parliamentary reviews.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.