National Tax Also Included in Pay Payment Bill... Banking Sector Says "..."

National Tax Collection Act Amendment Proposed in National Assembly
Banking Sector "Reducing Branches..." Complexity

National Assembly Plenary Session / Photo by Dongju Yoon doso7@

[Asia Economy Reporter Kiho Sung] The banking sector is experiencing mixed feelings as a bill proposing the payment of national taxes through simple payment methods such as Naver Pay or Kakao Pay has been submitted to the National Assembly. Since local tax payments via simple payment are already possible, the likelihood of national tax payment approval is high. However, banks, which need to reduce the number of branches despite concerns about customer loss, have no grounds to oppose it.

According to the National Assembly on the 28th, Representative Kwanseok Yoon of the Democratic Party recently introduced a partial amendment bill to the National Tax Collection Act containing such provisions. Representative Yoon stated, "Including prepaid electronic payment methods as a means of payment for national taxes or compulsory collection fees will enhance taxpayer convenience and contribute to encouraging sincere payment of national taxes."

Recently, prepaid electronic payment methods based on mobile applications (apps) have seen a daily average usage amount surge more than sevenfold, from 65.9 billion KRW in 2017 to 467.6 billion KRW last year. According to Nasmedia, as of the end of last year, the domestic simple payment usage rates were 73.8% for Naver Pay and 68.8% for Kakao Pay.

Currently, local taxes can be paid via simple payment. The fintech industry has been sending local tax bills for 17 metropolitan local governments since July 2019 through business agreements with the Ministry of the Interior and Safety, local governments, and the Korea Financial Telecommunications & Clearings Institute. This system notifies users of various local taxes such as property tax and resident tax, as well as traffic fines and penalties, through platforms and enables payment via simple payment methods. This is why the possibility of national tax payment approval via simple payment is gaining traction.

The industry’s stance on national tax payment via simple payment is divided. The fintech sector, which sees a high chance of approval, welcomes it as a means to attract customers. A representative from the Korea Fintech Industry Association said, "This legislation appropriately reflects changes in payment methods from the perspective of taxpayer convenience," and added, "The association actively welcomes it." On the other hand, the banking sector argues that allowing tax payments via simple payment raises concerns about customer loss.

However, the banking sector’s feelings are complex. A banking official explained, "Typically, tax collection at branches takes from 15 minutes up to 30 minutes," and added, "Tax collection at branches should be viewed not as a profit-making activity but as part of customer service."

The problem is that banks, which must reduce branches due to the acceleration of non-face-to-face services, are currently decreasing their branch numbers, making outright opposition difficult. According to the Financial Supervisory Service’s Financial Statistics Information System, the number of branches of the five major banks?KB Kookmin, Shinhan, Woori, Hana, and NH Nonghyup?remained similar from 4,699 at the end of 2018 to 4,661 at the end of 2019, but sharply declined last year due to the spread of COVID-19. The number dropped by 236 to 4,425 at the end of last year and further shrank to 4,380 as of the end of June this year.

Banks are actively encouraging tax payments via mobile banking. KB Kookmin Bank recently revamped its mobile app to provide a button that allows users to move directly to the payment screen from local tax bill notification content.

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