The Korea Herald

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[Editorial] Tax evasion

Free riders should be sternly punished

By Korea Herald

Published : April 14, 2015 - 19:36

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The National Tax Service recently announced it had collected more than 1.4 trillion won ($1.2 billion) in additional tax from about 5,000 tax evaders last year. More revenues would have been put into state coffers if the tax agency had expanded the target of its crackdown beyond those who avoided paying delinquent taxes exceeding 500 million won for more than a year.

These habitual tax dodgers’ lack of morals was far more severe than had been thought by many people. For example, a real estate company owner with 3 billion won in tax arrears was found to be living in a luxurious house ostensibly owned by one of his associates. He concealed a check and cash worth more than 130 million won in the wallet of his housekeeper shortly before NTS officials raided his home.

It is just absurd to let those with large sums in due taxes enjoy extravagant lives. Their tax evasion translates into a heavier burden on working-class and middle-income taxpayers who are struggling to make ends meet or reeling under increasing debts.

Korea’s prolonged economic problems have caused tax revenue shortfalls to balloon from 2.8 trillion won in 2012 to 8.5 trillion won in 2013 and further to 10.9 trillion won last year. The Finance Ministry expects tax revenue to fall short of the target again this year, though the shortage is forecast to fall to 3.4 trillion won.

Tax increases may be necessary to help fund expanded benefit programs. But any tax hike should be preceded by strengthened efforts to fill the loopholes in the taxation system and crack down on habitual tax evaders.

Under the current law, those found to have evaded taxes of more than 500 million won are subject to at least three years in jail. If the amount exceeds 1 billion won, tax dodgers may face up to life in prison. This criminal penalty is accompanied with the imposition of fines of up to five times the value of evaded taxes.

If applied strictly, punishments on tax delinquents might be strong enough. The reality, however, is that most of them avoid an actual prison sentence if they pay the taxes they owe. This loose application of the law leads to tax dodgers going around without fear of being duly punished.

All tax evaders should be given stiff punishments to establish justice in taxation and prevent grievances from conscientious taxpayers from growing further. NTS inspectors should carry out their crackdown on tax dodgers on a permanent basis throughout the year, not on sporadic occasions for public show.