South Korean tax authorities can't track down about 27 percent of self-employed people's income, data showed Monday, as they evade taxation through a range of expedient means.
According to the National Tax Office and the Bank of Korea, self-employed South Koreans filed tax returns for only 72.8 percent of their total income estimated at 120.4 trillion won ($107 billion) in 2014.
This means that local tax authorities couldn't keep tabs on the self-employed's remaining income and collect taxes from it.
In contrast, the ratio stood at 93.4 percent for salaried workers, whose income is easily scrutinized and subject to taxation because income tax is withheld from their pay.
The relatively low figure for the self-employed results from the fact that they personally report their income and tax-deductible expenses to the tax office, making it easier to hide income.
The easiest way for self-employed people to evade taxes is to get customers to pay in cash by offering them markdowns.
Self-employed people also resort to an irregular means of reducing their taxable income by treating personal spending as business expenses.
Experts called on tax authorities to ramp up efforts to clarify just how much money the self-employed made in order to reduce "a sense of tax resistance" among salaried workers.
"As a wake-up call for self-employed people who underreport their income, there is a need for the tax office to conduct tax audits into one-man operations on a pilot basis," said Hong Ki-yong, who teaches business administration at Incheon National University, west of Seoul. (Yonhap)
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