Finance Ministry Wildly Inaccurate in Budget Deficit Estimate

Persistent errors raise suspicions of the bureaucracy's partisanship.

Finance Ministry Wildly Inaccurate in Budget Deficit Estimate

Credit: Public domain.

Under the Moon Jae-in 문재인 administration, the Ministry of Finance and Strategy 기획재정부 drew criticism for significantly underestimating tax revenues. Then-Finance Minister Hong Nam-gi 홍남기 재정경제부 장관 came under fire when he opposed the Moon administration’s proposed COVID-19 economic assistance package on the grounds that “the nation’s storehouse is emptying,” only to face a surprise surplus in KRW 50t (USD 36b) in tax revenue in 2021.

Under the Yoon Suk-yeol 윤석열 administration, the Finance Ministry is making the same error in the opposite direction. According to the September 18 announcement, the South Korean government is expected to collect KRW 59t (USD 43b) less than the Finance Ministry had estimated. The shortfall amounts to a 14.8% deviation from the estimate, marking the third year in a row that the Finance Ministry’s estimate was off by double digits.

Some are beginning to question the Finance Ministry’s motives. In an interview, Myungji University 명지대학교 economics professor U Seok-jin 우석진 noted: “I think they [the Finance Ministry officials] were being dishonest. Corporate taxes are based on last year’s earnings, and you can see from last year’s mid-year pre-payment that this year was going to be a lean one. … Last year, I was expecting a KRW 20-30t drop in corporate tax, but the MSF was claiming it would only drop by KRW 1-2t. They are saying what their bosses want to hear.”

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