Concerns are growing that temporary tax breaks are effectively becoming permanent due to repeated extensions. Among the tax expenditures that were set to expire last year, those extended more than six times exceeded 13 trillion won. Some major deductions, such as the credit card income deduction, have been extended ten times.
According to a report from the National Assembly Budget Office on September 8, titled 'Improvement Measures for Efficient Management of Tax Expenditures,' only seven out of 71 tax expenditures that were set to expire at the end of last year were abolished. The remaining 64 were granted further extensions, meaning that nine out of ten tax breaks that reached their expiration date survived.
Tax expenditures are financial supports that reduce tax revenue through exemptions, income deductions, and tax credits. The sunset system is designed to evaluate the necessity and effectiveness of individual deductions at the end of their designated periods, allowing for extensions or abolitions. However, the repeated extensions have hindered the system's ability to effectively manage these programs.
Notably, the extended items have concentrated the relief amounts. Of the tax expenditures that were set to expire last year, 26 items, or 36.6%, were extended more than six times. These items accounted for approximately 71.2% of the total relief amount, which was estimated at 13.4 trillion won.
While only seven items were extended nine times or more, they represented a significant relief amount of 6.4 trillion won, making up 33.9% of the total relief for all expiring items.
A prominent example is the income deduction for credit card usage, which had a relief amount of 4.4 trillion won last year and has been extended ten times. Another example is the value-added tax credit for recycling resources, which also received ten extensions and has a relief amount of 1.8 trillion won.
The Budget Office pointed out that repeated extensions could create vested interests among beneficiaries, regardless of whether the original policy goals are achieved. There may be a tendency to maintain these deductions to avoid resistance to their abolition.
Another issue is that the results of performance evaluations do not sufficiently lead to actual reforms. According to the report, out of 132 mandatory in-depth evaluations conducted from 2015 to 2025, only 26 items were recommended for abolition or long-term reduction. However, only six of these were actually abolished.
There were also discrepancies in how the results of last year's mandatory evaluations were reflected in tax law amendments. While all eight items recommended for simple or expanded extensions were incorporated, only four out of six items recommended for reduced extensions or long-term reductions were included. Among the five items recommended for redesign, only two were reflected.
The scale of tax expenditures continues to grow. According to the '2026 Tax Expenditure Budget,' this year's tax expenditures are projected to reach 278 items, totaling 80.5 trillion won. This is approximately 7.7 times the 10.5 trillion won recorded when statistics began in 1999. The proportion of tax expenditures relative to gross domestic product (GDP) has also doubled from 1.4% to 2.8% during the same period.
The Budget Office emphasized the need to focus on whether the management system is functioning effectively, rather than just the increase in tax expenditures. Although systems like the sunset provision and in-depth evaluations are in place, there is a lack of connection between evaluation results and actual reductions, abolitions, or improvements.
To address this, the office proposed categorizing evaluation results and determining follow-up actions based on these categories. It also suggested that when evaluation results are not reflected, the reasons and alternative measures should be reported to the National Assembly to reduce the gap between evaluation and reform.
* This article has been translated by AI.
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