Published : 2013-09-29 11:02
Updated : 2013-09-29 11:03
The South Korean government is expected to introduce the so-called pay-as-you-go (paygo) system to help ensure its fiscal soundness while working to significantly boost its tax revenues, officials said Sunday.
The paygo is a system widely practiced in the United States and other advanced countries where any increase in direct spending prompted by a new law or revision must be offset by other spending decreases or revenue increases, meaning any new law that requires government spending must find its own resources before enacted.
"The government is currently in consultation with the ruling party to introduce new fiscal principles, including the paygo system, during the regular parliamentary session," an official from the Ministry of Strategy and Finance said.
The move comes as the growth of the government's mandatory spending is expected to outpace that of its tax revenues.
Already, the government's mandatory spending accounts for 47.2 percent of its total expenditures under the government's budget plan for 2014 that was revealed last week. The finance ministry expects the amount to reach 51.7 percent of all government spending in 2017 amid a growing focus on public welfare, posting an average growth of 6.9 percent per year.
The country's discretionary spending, on the other hand, is expected to grow only by an annual average of 0.4 percent during the 2014-2017 period, according to ministry officials.
To help finance its own spending without borrowing, the government is apparently stepping up its efforts to boost tax revenues, partly by exposing hidden wealth and underground transactions.
According to an official gazette posted Sunday, the government has expanded the number of revenue officials by 206, the largest increase of officials for any government office. The number includes 140 new officials for the National Tax Service (NTS).
The move is apparently aimed at improving the government's tax collection capabilities, as well as its capacity to expose underground market activities.
In the first half of the year, the NTS collected only about 60 percent, or 362.9 billion won ($337.6 million), out of 601.6 billion won imposed on offshore slush funds, Rep. Choi Jae-sung of the main opposition Democratic Party said, citing a report from the national tax office.
The NTS said it will continue to increase its efforts to expose tax evasion while also boosting its efforts to collect money from tax evaders. (Yonhap news)