SEOUL - Tax is a tricky issue for any government. Anything other than reducing rates is bound to create a public backlash. In South Korea, President Park Geun-hye's approval rating has taken a hit due to her government's attempt to sugarcoat a new tax scheme.
But that's another matter. National tax revenue came to 205.5 trillion won (S$251 billion) in 2014, according to the Ministry of Strategy and Finance. That was 3.6 trillion won more than a year earlier but about 11 trillion won less than the government's projection and the biggest miss ever. The previous record shortfall came in 1998, a year after the Asian currency crisis erupted.
This time, corporate and income tax receipts came in weaker than expected. Customs duties also missed the projection, since the strengthened won spelled fewer imports.
It marked the third consecutive year that the government's tax revenue fell short of projections. As a result, public spending temporarily slowed. "Public works spending dropped due to tax revenue shortfalls," said Jung Young-taek, head of the Bank of Korea's Economic Statistics Department. "This impacted the economy."
Jung was speaking in late January, right after October-December data sets were released. That report showed the country's gross domestic product growing 0.4% from the previous quarter, the lowest figure in nine quarters.