[2020 National Audit] 4,324 Households with 200 Million Won in Cash Receive 1.7 Billion Won in Earned Income and Child Tax Credits

Yang Hyang-ja, Democratic Party Lawmaker: "Exploiting Lower Valuation of Financial Assets on Specific Dates... Tax Incentive Act Needs Review"

Yang Hyang-ja, a member of the Democratic Party of Korea, is being interviewed on the 13th at the National Assembly Members' Office Building in Yeouido, Seoul. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Wondara] It has been revealed that earned income and child tax credits, which should have been paid to vulnerable groups, were paid to 4,324 households holding financial assets of 200 million KRW or more.

According to data submitted by the Board of Audit and Inspection to Yang Hyang-ja, a member of the National Assembly Budget and Accounts Special Committee from the Democratic Party of Korea, from 2016 to 2018, earned income and child tax credits totaling 1.783 billion KRW were paid to an estimated 4,324 households with financial assets exceeding 200 million KRW.

Among households with interest income of 6 million KRW or more in the past five years (assuming an average annual interest rate of 2% and financial assets of 300 million KRW or more), 495 households received earned income tax credits, and 509 households received child tax credits. The amounts paid to these households were approximately 720 million KRW in earned income tax credits and 380 million KRW in child tax credits.

In particular, Mr. K, residing in Seongbuk-gu, Seoul, had an annual interest income of 15.41 million KRW in 2018 but received 1.2 million KRW in earned income tax credits. When converted using the Bank of Korea’s announced average annual fixed deposit rate of 1.99% during this period, Mr. K’s deposit balance is estimated at 770 million KRW, yet he received earned income tax credits intended for low-income groups.

▲Status of Earned Income Tax Credit and Child Tax Credit Payments for Households with Interest Income Exceeding 6 Million Won.

Assembly member Yang pointed out, "It is generally assumed that people with financial assets of 300 million KRW or more also have more real estate or other assets, so it is incomprehensible that they received earned income and child tax credits."

Yang emphasized that the reason such de facto fraudulent receipt was possible is that "according to Article 100-4, Paragraph 4 of the Enforcement Decree of the Restriction of Special Taxation Act, the ownership and evaluation dates of assets are set to June 1 of the previous year, so by adjusting the value of financial assets on a specific date, it is possible to avoid exceeding the asset criteria. The National Basic Livelihood Security Act and the Basic Pension Act select and determine the recipients and payment amounts based on the average balance over three months, not a specific date. The Restriction of Special Taxation Act also needs to be reviewed."

This content was produced with the assistance of AI translation services.