Tax Evasion Collection Rate Undermining Tax Law Order and Livelihood at 29.2%... 6.7 Trillion KRW Not Recovered in Four Major Areas

Among the Four Key Focus Areas of Tax Audits, Tax Law Order and Livelihood Infringement Have the Lowest Collection Rate
Collection Rate for High-Income Business Operators in the Last 3 Years Falls Short of the Average Rate of 62.3%

[Sejong=Asia Economy Reporter Kim Hyunjung] It has been revealed that only 29.2% of the tax evasion amount in the tax law order and livelihood infringement sector over the past five years was collected. Although the tax audit performance in the four key focus areas improved somewhat last year, the collection rate in the tax law order and livelihood infringement sector remains low.

On the 23rd, Kim Jooyoung, a member of the National Assembly’s Planning and Finance Committee from the Democratic Party of Korea, confirmed the National Tax Service’s data on ‘Tax Audit Performance in the Four Key Focus Areas.’ According to the data, 3,489 tax audits were conducted in the tax law order and livelihood infringement sector, resulting in assessed taxes of 3.338 trillion KRW, but only 974.1 billion KRW, or 29.2%, was collected.

Over the past five years, a total of 15,030 tax audits were conducted in the four key focus areas. Of the assessed tax amount of 25.1533 trillion KRW, 18.4774 trillion KRW (73.5%) was recovered into the national treasury. Notably, the collection rate, which hovered around 70% from 2016 to 2019, rose to 80.1% last year, showing improved performance. However, tax evasion management for high-income business operators and the tax law order and livelihood infringement sector remains poor.

The National Tax Service designates ▲large corporations and wealthy individuals ▲high-income business operators ▲tax law order and livelihood infringement ▲offshore tax evasion as the four key focus areas and conducts intensive tax audits in these sectors.

Among these, the tax law order and livelihood infringement sector involves activities such as receiving false tax invoices, illegal profiteering through disguised names and borrowed accounts by entertainment establishments and loan businesses, unfair transactions exploiting superior positions by dominant franchise headquarters, and illegal or illicit acts targeting ordinary citizens in wedding halls, funeral services, high-priced academies, and star instructors, all of which generate huge profits while evading taxes through irregular means.

However, compared to other key focus areas, the collection rate is significantly lower. While the average collection rate over the past five years for large corporations, wealthy individuals, and offshore tax evasion is in the 80% range, the collection rate for tax evasion related to tax law order and livelihood infringement is only 29.2%, and even last year, when performance improved, it remained at 32.4%. The collection rates in 2018 and 2019 were only 22.9% and 25.9%, respectively.

Moreover, the collection rate for tax audits on high-income business operators’ tax evasion in the last three years has not even reached the five-year average collection rate. The five-year average collection rate for high-income business operators’ tax evasion is 62.3%, with only 1.9152 trillion KRW collected out of the assessed tax amount of 3.0497 trillion KRW.

Assemblyman Kim Jooyoung stated, "We must focus investigative capabilities and respond strongly to tax evasion acts that shake the foundation of tax law order, cause frustration among sincere taxpayers, and represent chronic tax evasion."

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