Rising Number of Corporations Reporting No Profit
The number of corporations that reported corporate taxes last year but failed to generate any profit has seen a significant increase, marking the largest rise since the statistics began being compiled. This surge is attributed to the ongoing economic challenges that have persisted following the end of the COVID-19 pandemic.
According to the National Tax Service’s National Tax Statistics released on the 9th, the number of corporations that reported corporate taxes with a net profit of zero or less reached 471,163 in the previous year. This represents an increase of 45,933 from the previous year, which is the highest growth rate recorded since the data collection started in 2012. This figure surpasses even the 44,394 increase observed in 2021, when corporate performance was severely impacted by the pandemic.
As the number of corporations failing to generate profits increased significantly, their proportion among all reporting corporations (totaling 1,058,498) reached 44.5%, the highest level since the statistics were first compiled. This marks a notable shift from previous years, where the proportion of corporations with zero or less net profit remained below 40% until 2019.
In 2020, this proportion rose to the 40% range and further climbed to 42.4% in 2021. However, it declined for two consecutive years, reaching 41.9% in 2022 and 41.3% in 2023. Last year, however, the percentage surged again, reflecting the continued economic struggles faced by businesses.
Even large corporations that typically report substantial net profits experienced poor performance last year. The number of corporations reporting net profits exceeding 1 billion Korean won decreased by 296 to 3,776 compared to the previous year. This marked the first decline in this category since the statistics began, as the number had been increasing annually prior to last year.
The overall poor performance in corporate tax reporting, regardless of profit size, is attributed to the prolonged economic slowdown that has followed the pandemic. This economic stagnation has affected businesses across various sectors, leading to a significant impact on tax revenues.
Last year’s tax revenue shortfall amounted to 30.8 trillion Korean won, marking the second consecutive year of a major shortfall after the 56.4 trillion Korean won deficit recorded in 2023. The government anticipates that this year’s national tax revenue will fall short of the budgeted amount by 12.5 trillion Korean won due to factors such as sluggish domestic demand.
Key Trends in Corporate Performance
- Increase in Loss-Making Corporations: The number of corporations reporting no profit has risen sharply, indicating widespread financial difficulties.
- Proportion of Non-Profit Corporations: The percentage of companies with zero or negative profits has reached a record high, signaling broader economic challenges.
- Impact on Large Corporations: Even major firms with substantial profits saw a decline in their numbers, highlighting the severity of the downturn.
- Tax Revenue Shortfalls: The persistent economic issues have led to significant tax revenue shortfalls, affecting government budgets and planning.
These trends underscore the need for targeted economic policies to stimulate growth and support businesses during these challenging times.
