It was found that, even though the amounts were deemed collectible, the unpaid balances that were not recovered and went into arrears more than doubled in five years. The National Tax Service said that despite efforts to reduce arrears, delinquencies have surged due to the recent economic slump. But arrears have steadily increased even in years when the growth rate was not bad, prompting criticism that "economic slowdown" alone is not enough to explain it.
According to data the National Tax Service submitted on the 28th to the office of Choi Eun-seok, a member of the People Power Party on the National Assembly's Strategy and Finance Committee, the annual "arrears under resolution" over the past five years were ▲ 2020: 9.5284 trillion won ▲ 2021: 11.4536 trillion won ▲ 2022: 15.5673 trillion won ▲ 2023: 17.7491 trillion won ▲ 2024: 19.3562 trillion won.
Arrears under resolution are the opposite concept of "deferred resolution," in which collection is abandoned because the delinquent cannot be reached or has no assets. It is the amount deemed collectible but not yet collected, minus amounts where tax imposition was canceled due to miscalculation and the like. Such arrears under resolution were around 10 trillion won as of 2020 but soared to about 20 trillion won in 2024.
The National Tax Service said, "Despite proactive efforts to reduce arrears, the scale of the economy has expanded and recent economic sluggishness has caused arrears to increase significantly." But it does not account for the fact that the arrears amount grew sharply in 2021, when the economic growth rate was 4.6%, and in 2022, when the growth rate (2.7%) was higher than the potential growth rate (about 2%). In particular, during this period, arrears under resolution increased by 20% and 35% year over year, respectively, rising more than in other times.
Arrears increased faster than the pace of growth in national income. Korea's estimated per capita gross domestic product (GDP) last year was $36,024, up only 6.5% from 2020 ($33,594). But arrears under resolution increased 103.1% over the same period.
By tax item, arrears under resolution for value-added tax increased the most, from 4.4781 trillion won to 8.4236 trillion won. The increases were large for corporate tax, income tax, and inheritance and gift tax. Over five years, corporate tax rose 177.3%, from 767.9 billion won to 2.1294 trillion won. Income tax (2.5656 trillion → 6.1289 trillion won) and inheritance and gift tax (385.5 billion → 920.4 billion won) increased by 138.9% and 138.8%, respectively.
Deferred resolution, which is deemed uncollectible, decreased somewhat and has been on the rise since 2023. Annual deferred resolution amounts fell from 7.0583 trillion won in 2020 to 6.1589 trillion won in 2021 and 6.0093 trillion won in 2022, then rose to 8.7981 trillion won in 2023. In 2024, it was 8.7993 trillion won, similar to the previous year. The cumulative deferred resolution amount piled up each year is 91.4 trillion won, and the total arrears, combining last year's arrears under resolution, are 110.7 trillion won.
At the same time, the share of arrears the National Tax Service recovers in cash is falling. In 2020, cash resolution (10.5999 trillion won) accounted for 39.0% of arrears subject to resolution, but last year the figure fell to 30.1% (12.1407 trillion won).
That does not mean collections through seizure of non-cash assets have increased. The National Tax Service said it does not separately manage statistics on collections related to seizure and public auction apart from cash collections. Only the number of cases is tallied. Last year, the National Tax Service seized delinquent taxpayers' real estate, automobiles, movable property, and marketable securities in 165,947 cases, a level similar to 2020 (165,288 cases).
In this regard, the National Tax Service said it will establish a team dedicated to identifying targeted analytical materials and expand the tax office's tracing task force to all agencies.
Choi Eun-seok said, "The massive arrears accumulating ultimately burden all citizens," adding, "We need to rigorously review the National Tax Service's arrears management status and prepare effective measures."