By Yoon Ja-young
Staff Reporter
The National Tax Service (NTS) plans to launch an upgraded tax information system as early as next May in a bid to remove loopholes in taxation for high-income professionals and the self-employed.
The tax agency confirmed Tuesday that it is working on a plan to set up an integrated taxation information system, which would collect information on each individual regarding how much money they've spent. If anyone spends too much money compared to his or her income, they would become a target of the new scheme.
Currently, the agency digs up cases of tax evasion through audits. The agency picks a list of targets for audit by comparing income filings with the industry average ― those who filed extraordinarily little income compared with their peers in the industry are the first.
When the integrated system is set up, tax evasion will have the potential to be tracked at any time as it will show how much has been spent and earned. Information such as credit card spending, acquisition of assets and savings will be included and compared with income filings.
The measure came amid snowballing fiscal deficit following a series of tax cuts by the administration of President Lee Myung-bak and an economic stimulus package to survive the global financial crisis. The state debt is expected to reach 366 trillion won this year, or one-third of the gross domestic product (GDP).
Digging up new tax sources has become a priority for the administration, and many have pointed out that the country's huge underground economy is being left untouched by the tax authority. It is estimated to make up 27.6 percent of the GDP.
That figure rates as the third highest ratio among Organization for Economic Cooperation and Development (OECD) member countries, following Turkey and Mexico.
"The underground economy is estimated to be as big as 270 trillion won, or 27 percent of the 100 trillion won GDP. When applying a 20-percent tax rate, the government can collect 54 trillion won more taxes there," Rep. Cha Myung-jin of the governing Grand National Party said in a parliamentary audit last month.