This report addresses “examples of fiscal rules of other countries related to sovereign debt and what they imply” as well as “the performance of national tax income for the months January-July, 2013.”

  Fiscal rules are a fiscal policy measure adopted by a number of countries in order to secure fiscal discipline. As such, they are a set of specific, legally binding rules on the matters of  sovereign debt and quantitative fiscal indicators. Fiscal rules are classified into import rules, expenditure rules, fiscal account rules, and sovereign debt rules in accordance with the variables for the objective. Meanwhile, depending on the type, they vary in the degree to which they respond to economic cycle, the degree to which they stabilize the fiscal situation, or the degree to which fiscal matters are facilitated. According to the IMF(2012), the number of countries that have adopted fiscal rules increased from five in 1990 to 76 in 2012. By legislating fiscal rules on sovereign debt, major countries around the world are assessed to have secured fiscal stability and fiscal sustainability. In accordance with its Fiscal Responsibility Act, 2010, the United Kingdom must reduce the ratio of its Public Sector Net Debt (PSND) to its GDP to a level lower than that of the previous fiscal year. Switzerland operates its debt deterrent rules by capping its government expenditures to within the structural import limit. Germany , through legislative reform in 2009, adopted a national debt policy rule that sets the total amount of new debt and a target year for fiscal balance that goes even further than the fiscal rules seen in the UK or Switzerland.
Meanwhile, Korea has been operating under a set of rules on imports, expenditure controls and sovereign debt management through the “National Fiscal Act” and the “National Fiscal Management Plan” but the results leave much to be desired and therefore calls for additional measures that are more effective. When adopting a new set of fiscal rules, one that secures fiscal stability while allowing proper responsiveness to economic cycles must be selected. The rules should also be legislated so as to have a legally binding effect. Germany and Switzerland stipulate fiscal rules in its constitution, but in our case we may consider limiting the balanced fiscal account,  setting a debt ratio, or capping expenditures by writing relevant clauses into the “National Fiscal Act.” In addition, in order to secure a proper level of responsiveness to economic cycles, setting a medium-term fiscal operation objective as a structural fiscal account while excluding the automatic increase in import expenditures that would result from a change in the economic cycle from the existing operational budget balance should be considered.

  The national tax revenue up to July, 2013 is 122.7 trillion Won, a decrease of  8.2 trillion Won when compared year-to-year. Due to an increase in revenue from value-added tax during the month of July (which was an increase of 1.2 trillion Won month-to-month), the slip in tax revenue was not as big as that in  the months from January to June (which was a decrease of 10.1 trillion Won year-to-year). The rate of tax collection for the period from January to July this year recorded 58.3%, which is lower than the average of 64.2% over the past three years by 5.9%p.