Government Tax Revenue Estimates Erred by Annual Average of 51 Trillion Won Over 4 Years Since 2021

An audit has revealed that the government generated an average annual error of around 50 trillion won over the past four years by using unrealistic models to estimate tax revenues.

The Board of Audit and Inspection (BAI) disclosed these findings in its audit report on the operational status of major fiscal management systems.

According to the BAI, the annual average error in tax revenue projections between 2021 and 2024 amounted to 51.5 trillion won.

The report pointed out that despite the strong likelihood of corporate profits declining due to rapid changes in external economic conditions, such as Russia's invasion of Ukraine, the government applied past statistical averages to pre-tax net profit margins or failed to properly reflect the effects of tax law revisions.

The BAI subsequently notified the Ministry of Finance and Economy to prepare measures to improve the design and operation of forecasting models to enhance projection accuracy.

The BAI also noted that when tax revenue shortfalls occurred, the government placed a burden on future fiscal operations through methods such as "internal transactions" that bypassed parliamentary oversight.

It was found that when revenue shortfalls arose, the former Ministry of Economy and Finance deferred repayments on loaned funds to transfer money from individual funds to the Public Capital Management Fund, which was then used to cover deficits in the general account.

In addition, hundreds of billions of won in unused balances of government subsidies were found not to have been returned to the state treasury.

The Subsidies Act stipulates that heads of central government agencies must settle subsidies by the following year upon the completion of state-subsidized projects and recover unused balances from local governments and other entities.

However, an inspection of 20 central government ministries revealed that unused subsidy balances that were not properly returned to the state treasury reached 753 billion won.

The investigation revealed that this was caused by errors in settlement information between the central and local subsidy systems, or by local governments avoiding returns due to their own fiscal burdens.

Furthermore, the BAI stated that management was found to be lax after checking a sample of 723 cases out of 25.1 trillion won in uncollected claims (non-tax revenues) as of the 2024 financial settlement, with 637 cases, or 88 percent, identified as "phantom claims" whose existence could not be confirmed or had already been paid.

(Photo courtesy of the Board of Audit and Inspection, Yonhap News)
※ Please note: This article was translated by AI and may contain errors.