'Direct Hit from Domestic Demand Slump': National Tax Arrears Top 116 Trillion Won... Late-Payment Penalties Alone Exceed 21 Trillion Won in 5 Years

Value-Added Tax Arrears Highest at 33 Trillion Won
Late-Payment Penalties Also Total Around 21 Trillion Won Over Five Years

Amid a prolonged slump in domestic demand, national tax arrears have exceeded 116 trillion won, while late-payment penalties imposed before tax offices issue payment notices have totaled more than 21 trillion won over the past five years or so.

National Tax Service's Sejong Government Complex. National Tax Service.

According to data submitted by the National Tax Service to Kang Minguk of the People Power Party, a member of the National Assembly's Finance and Economy Planning Committee, cumulative national tax arrears stood at 116 trillion 3.1 billion won as of the end of June this year, with 5,642,792 cases of arrears. Arrears rose from about 99.8 trillion won in 2021 to about 102.5 trillion won the following year, surpassing the 100-trillion-won mark, and have continued to increase each year since.

By tax category, unpaid value-added tax, which starkly reflects the downturn facing self-employed people, accounted for the largest share at 33 trillion 443.1 billion won. This was followed by income tax at 27 trillion 430.5 billion won, capital gains tax at 13 trillion 387.1 billion won, corporate tax at 11 trillion 298 billion won, and inheritance and gift tax at 3 trillion 368.1 billion won.

As unpaid principal taxes have increased, the amount of interest-like penalties imposed has also grown. Late-payment penalties imposed before a payment deadline, which accrue automatically when taxpayers fail to pay income tax, corporate tax, or other taxes by the statutory filing and payment deadline, up to the day before a tax payment notice is issued, totaled 21 trillion 626.1 billion won from 2021 through July this year. Late-payment penalties imposed after a payment deadline, which apply when taxpayers also miss the deadline formally specified in a tax office notice, stood at about 700 billion won in 2021 but increased each year, reaching 2 trillion 656.6 billion won last year. They continued to rise markedly this year, with 1 trillion 735.9 billion won imposed through July.

Kang said of the situation, "The sharp increase in penalties imposed for national tax arrears and nonpayment reflects the reality of a prolonged slump in domestic demand and demonstrates the limits of the National Tax Service's tax collection scale and methods. Rather than focusing on imposing penalties, it is necessary to shift course toward a strategy to manage the pace of growth in arrears and penalties and develop measures to address the situation."

The National Tax Service said, "The amount of late-payment penalties tends to rise depending on the scale and duration of tax arrears," adding, "We plan to manage long-term arrears more systematically by strengthening field-based arrears management, including through the operation of arrears management teams."

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