Samjeomsam users face tax repayment challenges after refund errors in South Korea

A, who has dependents, joined the tax platform 'Samjeomsam' in 2023. He became interested in an advertisement message urging him to 'check the refund' and paid a fee of 50,000 won, receiving a tax refund of 380,000 won. However, a few months later, A received contact from the National Tax Service stating that 'the dependent information is duplicated' and was told to repay 430,000 won including additional tax. A protested to Samjeomsam, but received a response stating it was not their fault. Samjeomsam compensated the additional tax of 50,000 won but did not refund the service fee.

In online communities, there are several reviews confirming that users have received so-called 'hidden refunds' using the tax platform application 'Samjeomsam.' The problem is that many users have reported not only failing to receive a refund of their comprehensive income tax but also having to repay additional tax on top of the service fee. With the National Tax Service beginning an investigation into these tax platforms, it is expected that many users who have been forced to repay taxes will emerge.

◇ Advertisement for finding 'hidden refunds'... the problematic involvement in tax operations beyond mediation

Platforms typically have 'mediation' as their main business model. Real estate platforms like Zigbang and Dabang, as well as legal platforms like LawTalk, have received positive evaluations for simplifying complex document procedures that citizens struggle with and alleviating information asymmetry. While these platforms faced significant opposition from existing operators, they are establishing themselves as they gain the trust of users.

However, Samjeomsam has been criticized for being involved in national tax operations beyond mediation. The Korea Tax Accountants Association claims that Samjeomsam illegally acts as a tax agent without certification while excessively collecting personal information. Samjeomsam informs users of the expected refund amount when they enter their personal information, and takes 10-20% of the actual refund amount as a fee once the refund is made. In that process, Samjeomsam is entrusted with the authority to access users' information from HomeTax, such as income levels.

Samjeomsam informs users, 'If other income exceeds 3 million won, you can choose whether to report it together with the comprehensive income tax (combined reporting) or report it separately (separate reporting). The key is to select the option that can reduce the tax payable or increase the refund amount.' It states that Samjeomsam automatically determines how to report based on users' information through an internal system.

As Samjeomsam gained popularity, comprehensive income tax refund applications reportedly doubled, causing National Tax Service staff to become overwhelmed. The number of refund applications increased from 373,000 in 2022 to 653,000 in the first half of last year.

In this situation, the National Tax Service is expected to investigate the undue and excessive refunds through tax platforms as early as the first half of this year. When recovering refunds due to correction claims, the National Tax Service plans to impose unpaid tax additional taxes instead of imposing penalties for reporting discrepancies. The Korea Tax Accountants Association noted, 'We are concerned about the damage to many citizens who may be subjected to tax and additional tax recoveries due to the National Tax Service's comprehensive inspection.'

◇ The ongoing 'judicial risk' of tax platforms

In the industry, if users subjected to additional tax demand compensation, tax platform companies may not be free from judicial risk. Jobis & Villains, the operator of Samjeomsam, was already reported to the Fair Trade Commission by the Korea Tax Accountants Association last year for false and exaggerated advertisements and legal violations. In 2023, the Personal Information Protection Commission imposed penalties of 850 million won and fines of 12 million won on Samjeomsam for excessive collection of users' personal information. Additionally, the Korea Tax Accountants Association reported Kim Beom-seop, the representative of Jobis & Villains, claiming that the Samjeomsam service constitutes an 'unqualified tax agent' in 2021, but the prosecution ruled it as no wrongdoing.

Kwon Oh-hyun, a professor at Soonchunhyang University, said, 'Typically, the National Tax Service automatically processes refund applications for small amounts and verifies them afterward. This process can take as little as six months and as long as a year. From the user's perspective, it feels like they have received money immediately thanks to Samjeomsam. However, when they later find themselves having to pay more taxes, it feels like a deception as the tax platform sidelines itself from that responsibility.' He added, 'The burden of responding when the National Tax Service issues a request for clarification falls entirely on the user.'

In the IT industry, there are also criticisms that the National Tax Service shifts the responsibility for an overload of work onto tax platforms. The increasing number of refund applications has led to cases where the National Tax Service employees, unable to handle the surge, failed to verify the accuracy of the information provided by users, resulting in additional tax notices. A startup official remarked, 'Samjeomsam's simplification of difficult tax matters is commendable,' adding, 'Users can input incorrect information not only on tax platforms but also on HomeTax. It is unfortunate that a service regarded as innovative seems to be misrepresented as fraudulent.'

Kim Woo-cheol, a professor at the University of Seoul, commented, 'It is desirable that Samjeomsam has expanded tax services at a low expense,' but noted, 'There are cases that require expert opinions depending on the individual, and it seems risky to rely entirely on a platform with low accountability.' He further stated, 'If the National Tax Service raises issues regarding excessive promotion through this investigation, the platform should present alternatives.'

Samjeomsam stated, 'We agree with the National Tax Service's efforts to establish a culture of faithful reporting. The tax platform is also continuously working on system upgrades to minimize errors in personal deductions,' adding, 'Regarding personal information protection, we strictly adhere to the guidelines set forth by the Personal Information Commission.'