[Sejong = E-Daily Park Sun-Yeop Reporter Kim Mi-young] With national tax revenue this year expected to exceed the forecast made at the time of the supplementary budget by 63.2 trillion won, plans for utilizing the massive tax surplus have emerged as a key issue. Amid calls to increase government bond redemptions in light of rising long-term interest rates and the interest burden, the government is consulting with relevant ministries on how to utilize the tax surplus.

According to the “2026 National Tax Revenue Re-estimation Results” released by the Ministry of Finance and Economy on the 30th, this year’s national tax revenue is projected to reach 478.6 trillion won. This figure is 15.2% higher than the forecast (415.4 trillion won) made during the supplementary budget process last April and represents an increase of 104.7 trillion won compared to last year’s actual revenue (373.9 trillion won). National tax revenue collected through August also totaled 329.9 trillion won, which is 69.1 trillion won more than during the same period last year.

More than half of the increase in tax revenue compared to the supplementary budget forecast comes from corporate income tax. The government estimates that corporate income tax revenue this year will reach 136.4 trillion won—35 trillion won more than projected in the supplementary budget. Market forecasts for the combined operating profit of Samsung Electronics and SK Hynix this year have jumped from 339 trillion won—the figure used when drafting the supplementary budget—to 638 trillion won this month. The government reflected the improved performance of these two companies in its revised corporate income tax estimates.

With tax revenue projections rising significantly in this manner, how to allocate the increased funds has become a challenge. The current National Finance Act allows for the priority repayment of government bonds using projected excess tax revenue, within the limit of the amount of government bonds already issued in the relevant fiscal year, to cover shortfalls in general account revenue. In the supplementary budget passed last April (26.2 trillion won), 1 trillion won was also allocated for government bond repayment.

Rising interest rates and the resulting interest burden are adding weight to the argument for repaying government bonds. On the 28th, the yield on 10-year U.S. Treasury bonds surpassed 5.2%, reaching its highest level since 2007, and the yield on 10-year domestic government bonds has also recently exceeded 4.5%. If high interest rates persist, it could increase the burden on government bond issuance as well as corporate bond issuance and other forms of corporate financing.

Rising long-term bond yields also place a strain on the national budget. According to the government’s National Debt Management Plan, interest expenses on national debt are projected to rise from 36.5 trillion won this year to 42.8 trillion won next year and 53.3 trillion won by 2030. This is the backdrop for arguments that the government should use excess tax revenue to repay existing debt or reduce new issuance to alleviate future interest burdens.

However, since the government is pushing to establish a Future Response Fund, the option of transferring excess tax revenue to this fund remains open. The amendment to the National Finance Act submitted to the National Assembly includes provisions allowing excess tax revenue to be transferred to the Future Response Fund. The government’s plan is to use the fund to invest in youth and growth engines, while utilizing surplus funds as a fiscal safety net to prepare for future declines in tax revenue.

Concerns have been raised both within and outside the government regarding this fund management plan. With national debt set to increase by 106 trillion won next year compared to this year, the government has already decided to allocate over 100 trillion won in additional tax revenue—generated solely next year through reforms to the settlement methods for local government grants and education grants—to the Future Response Fund. Critics argue that adding surplus tax revenue to the fund on top of this is “excessive” and that more resources should be used to reduce financing costs by cutting back on government bond issuance.

Experts also believe there is a need to increase the scale of government bond redemptions. They argue that, given the significant increase in spending already included in next year’s budget proposal, any excess tax revenue should be prioritized for reducing debt. There are also suggestions to establish guidelines setting a minimum amount to be used for bond redemptions whenever excess tax revenue occurs, with the remainder allocated to the Future Response Fund and other purposes.

Kim Woo-cheol, a professor in the Department of Taxation at the University of Seoul, pointed out, “Since spending has already been maximized through next year’s budget proposal and the Future Response Fund, any tax surpluses should be used entirely—or at least 90 percent, amounting to over 50 trillion won—for government bond repayment if possible.” He added, “Given that rising market interest rates are making it difficult for companies to issue corporate bonds, increasing government bond issuance would create a crowding-out effect; therefore, we must stabilize market interest rates by repaying government bonds.”