Lim Kwang-hyun, Commissioner of the National Tax Service, has stressed the need to establish a "Future Response Fund" that would invest tax revenue boosted by the semiconductor boom into future strategic industries. The aim is to improve a structure in which tax revenue fluctuates sharply depending on the performance of specific industries and a handful of large companies, while also preparing for welfare demand arising from low birth rates and an aging population.
On the 12th, Lim wrote on his X (formerly Twitter) account, "Korea's tax revenue structure is highly dependent on specific industries and a small number of companies." He added, "Looking at this 'concentrated portfolio,' I am always concerned as someone responsible for the nation's tax revenue."
He pointed to the problem of national tax revenue, including corporate tax, swinging widely according to semiconductor industry conditions. "When the semiconductor industry enjoys a boom, tax revenue increases rapidly, led by corporate tax, whereas when the semiconductor economy slows, corporate earnings deteriorate and tax revenue declines, repeatedly causing difficulties in fiscal management," Lim explained.
In fact, the average annual tax revenue growth rate over the past 20 years was 5.71 percent, but the year-to-year swings were large. In 2021, when the semiconductor economy boomed as untact demand rose following the spread of COVID-19, national tax revenue increased 20.6 percent from the previous year. By contrast, in 2023, when information technology (IT) demand slowed and semiconductor companies' earnings deteriorated, tax revenue fell 12.6 percent.
Lim's assessment is that this year, too, corporate tax is rising thanks to the semiconductor super cycle, and related tax items such as the securities transaction tax are showing steep increases amid a buoyant stock market.
"Sustainable public finance depends not only on how much tax revenue is secured but also on how stable the structure through which it is secured is," Lim stressed. His point is that the country must maintain a wide lead in the semiconductor industry while cultivating new strategic industries to diversify both its industrial and tax revenue bases.
"Semiconductors, our core competitiveness, should continue to be nurtured as an industry with an unrivaled lead to solidify our global technological edge, while we must also actively invest in new strategic industries that will be our future livelihood," he said. "This will not only secure future growth engines but also lead to a virtuous cycle that diversifies the industrial structure and, over the long term, builds a balanced and stable tax revenue base."
Lim also assessed the plan to establish a Future Response Fund, which would channel the additional tax revenue generated by the semiconductor windfall into strengthening the nation's long-term competitiveness, including the three mega projects, as "an absolutely necessary policy."
"From the standpoint of a revenue-collecting agency, I expect it will be possible to simultaneously secure the sustainability of public finance in preparation for welfare demand that will increase due to low birth rates and an aging population, as well as tomorrow's competitiveness," he said.
