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Entertainers cash in on tax loopholes
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Song Hye-kyo
By Yoon Ja-young
Jang Keun-suk
By Yoon Ja-young
Actress Song Hye-kyo made headlines in August over a tax evasion scandal. The following month, officials from the National Tax Service questioned singer and actor Jang Keun-suk for allegedly underreporting income made in China.
Entertainers’ incomes have increase 24 percent during the past three years thanks to “hallyu,” but the tax agency is being criticized for leaving loopholes.
According to the “Statistical Yearbook of National Tax,” the country’s entertainers earned 39.6 million won in 2013, up 24.3 percent from three years ago. Among them, singers led the way. In 2010, they earned on average 27 million won, which jumped 72.2 percent to 46.7 million won. The so-called hallyu stars pulled up the average income, as they bolstered their fan numbers around the world.
“The hallyu stars’ income is much bigger than people imagine,” said the public relations manager of a girl group, who asked not to be named. “Even those who aren’t’regarded as top stars in Korea get much more of their income from abroad than from the domestic market.”
However, the tax agency has been criticized for leaving tax loopholes for entertainers.
Salaried workers, for instance, earned on average 30.1 million won in 2013, up 16.3 percent from 2010, but they have little room for tax avoidance as they pay withholding taxes from their salaries.
Their final tax is determined at the end of the year after deducting expenses such as credit card spending or medical expenses. The country’s salaried workers paid on average 2 million won as tax in 2013, which is up 19.2 percent from 2010.
Entertainers and sports players, meanwhile, file business income _ the tax agency determines the tax based on the filing. This means they can omit part of their income.
“While their income from advertisements or movie or TV dramas is relatively transparent, they will often be paid in cash when they, for instance, perform for small cultural events in provinces,” said tax accountant Park Sung-chun. “It’s not difficult for them to omit part of such income.”
They can also be dishonest in filing expenses. The tax code allows entertainers to deduct business-related spending from their income. For instance, if an actress earned 1 billion won and spent 600 million won for “business,” such as salaries for manager, stylist, and driver, the tax is levied on 400 million won instead of 1 billion won.
The problem is that the entertainers can exaggerate their spending. For instance, Song claimed 5.5 billion won as expenses from her 13.7 billion won income from 2009 to 2011, without submitting proper documents to prove the spending.
Popular MC and comedian Kang Ho-dong was also levied 700 million won additional tax in 2011, as he failed to clarify his spending. In Kang’s case, the tax agency determined that he did not avoid tax on purpose.
Actress Kim Ah-joong was also levied 600 million won tax in 2011 for omitting income, as was popular singer Insooni. Hallyu star Bae Yong-joon also lost a lawsuit over tax in 2011.