The results of a National Tax Service (NTS) investigation of high-income self-employed individuals make regular people around the country who dutifully earn monthly salaries feel despondent. On average they reported only 40 percent of their actual earnings, and one person, over a two-year period, earned W2.76 billion but reported earning only WW120 million. Small business earners would be one thing, but these are self-employed professionals who keep account books and should be subjected to regular scrutiny by the tax authorities. So the fact that there is so much tax evasion can only be the result of negligent enforcement.
It is self-evident that a society where tax dodgers carry themselves with confidence is going to have a hard time developing in a healthy manner. Tax evasion does not simply eat away at the state's tax revenue, it also becomes a factor in socioeconomic disparity and economic insecurity. The NTS' assessment is accurate when it says income withheld through tax evasion is used as a source for speculative real estate investment, and by doing so aggravates the disparity of wealth and disturbs the economy.
The NTS says that to bring normalcy to the taxation of high-income self-employed citizens it is going to engage in tax audits more than once a quarter, but that is not enough. It will be hard to stop tax evasion by making people pay what was unreported or unpaid from what they are supposed to pay in the first place. People will continue to think that you can just pay up if you're unlucky enough to get caught.
The price you pay when you're caught has to be greater than the financial gain of the initial failure to pay. For starters, the authorities need to make active use of the investigation that is being done on the premise there will be complaints sent to the prosecution. Currently there are only 300 cases uncovered every year in these investigations, which means the situation really is such that you only get caught if you're unlucky. It would also be worth considering disclosing the list of big-time tax evaders, together with persons who owe a lot in taxes but remain unpaid. The taxes people are made to pay after getting caught has to be increased to the point it feels like punishment. The results of research by tax experts say strong penalties are fare more effective.
The Hankyoreh, 21 March 2006.
[Translations by Seoul Selection]
[Editorial] Stronger Penalties Needed for Tax Evasion |
