Concerns have emerged regarding the sustainability of the Future Response Fund, which is being financed by increased tax revenue from the semiconductor boom. The National Assembly Budget Office (NABO) has analyzed that the additional tax revenue, a key source for the fund, will be concentrated in 2027 and 2028, and will cease to exist starting in 2029.
According to NABO's report on the 'Comprehensive Analysis of the 2027 Budget Proposal' released on November 1, both the government's national fiscal operation plan and NABO's own projections indicate that domestic tax revenue trends will exceed actual forecasts starting in 2029. This suggests that additional tax revenue, which exceeds long-term revenue trends, will no longer be generated.
NABO estimates that additional tax revenue will reach 57.3 trillion won in 2028 but predicts it will disappear from 2029 onward. The criteria for calculating additional tax revenue are based on domestic tax performance from two years prior and the growth rate at that time. If the growth rate slows or turns negative, generating additional tax revenue becomes difficult.
NABO has characterized the additional tax revenue as a temporary resource concentrated in 2027 and 2028. As the growth rate of tax revenue declines, the capacity to accumulate funds may diminish during a period when fiscal stabilization is needed, prompting a call to reassess the fund's operational plans that rely on additional tax revenue. However, it noted that other sources, such as excess tax revenue, global surplus funds, and operational profits from surplus funds, could also be utilized for the fund, making it difficult to determine the fund's sustainability based solely on additional tax revenue.
A significant concern is that many projects funded by the Future Response Fund require annual expenditures. According to NABO, 46.7% of the 45.3 trillion won allocated for the fund's four major projects is characterized by recurring expenditures. Projects like the basic child allowance, which accumulates beneficiaries, and the youth future savings plan, which requires contributions to existing members even if new enrollments stop, exemplify this issue. Starting projects with temporarily secured tax revenue could lead to increased fiscal rigidity as expenditures become difficult to reduce once tax revenues decline, NABO warned.
NABO suggested that rather than solely investing the increased tax revenue from the semiconductor boom into future investments, it should also be allocated for national debt repayment and fiscal stabilization reserves. Reducing national debt during periods of strong tax revenue aligns with the intent of national fiscal laws, and appropriate levels of national bond repayment should be pursued without disrupting market stability. The repayment scale should be determined based on annual maturity distribution and market conditions, with a minimum of 51% of the remaining balance after processing global surplus funds considered for debt repayment.
It is also important to consider that using all additional tax revenue for national bond repayment could excessively reduce bond issuance, potentially constraining market liquidity. Therefore, principles for resource allocation should be established that balance future investments, fiscal safety nets, and debt management.
Concerns have also been raised that expanding fiscal expenditures next year could stimulate inflation and interest rates. The government has proposed a total expenditure of 820.9 trillion won for next year, an increase of 67.9 trillion won (9.0%) compared to this year's supplementary budget. NABO pointed out that expanding fiscal expenditures could increase overall demand, leading to inflationary pressures and rising interest rates, which could burden vulnerable groups and businesses through increased interest burdens and reduced real purchasing power. It emphasized the need for a carefully designed expenditure structure and execution plan to mitigate adverse effects.
To ensure the Future Response Fund functions stably despite declining tax revenues, there is a call to clarify the criteria for accumulation and withdrawal, prioritize projects, and balance with national debt repayment.
* This article has been translated by AI.
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