The government is bearing fruit from its plan to normalize the underground economy in an effort to secure tax revenue to finance its welfare pledges.
In a report to the National Assembly’s Strategy and Finance Committee on Monday, the Korea Customs Service and the National Tax Service said they secured tax revenue amounting to around 1.99 trillion won ($1.9 billion) as of the end of September this year.
This accounted for 72.8 percent of the initial target set early this year when the two tax and tariff enforcement agencies vowed to collect taxes through rigorous audits of the self-employed, private moneylenders and currency exchange dealers in the black market.
The government was aiming to reach a tax collection ratio of 72.4 percent of its target by the third quarter of this year, amid the economic slowdown. It said it exceeded its goal by 0.4 percentage points.
The National Tax Service achieved a ratio of 72.6 percent, while the Korea Customs Service exceeded that with 73.2 percent.
The Ministry of Strategy and Finance reported to the Strategy and Finance Committee that its agencies would be able to secure 97 percent of its yearly tax target through the normalization of the underground economy by the end of this month.
The National Tax Service has been cracking down not only on the black market but also on offshore accounts held by the rich and by conglomerates in tax havens. It has also been strengthening its audits of companies with annual sales of more than 300 billion won.
It has also revised its periodic audit requirements, lowering the minimum amount of annual sales necessitating a probe from 500 billion won to 300 billion won.
The Park Geun-hye administration plans to secure 135 trillion won over the next five years to finance the country’s welfare system expansion, as pledged by the president during her election campaign last year.
Of the 135 trillion won needed to finance the welfare scheme, 53 trillion won will come from government revenue sources, with the rest secured through budget restructuring, the Ministry of Finance noted.
The administration previously mentioned it would not introduce new taxes or raise taxes but would instead reduce the number of tax exemptions and benefits enjoyed since the global financial crisis of 2008.
In order to collect the proper amount of taxes, the government has been setting its tax auditors and regulators against rich citizens who are allegedly hiding financial assets overseas via tax haven accounts and the black market.
