[Contribution] Tax agency to help find unclaimed income tax refunds

Kim Young-chul, a food delivery rider in Seong-dong, Seoul, recently received a text message from the National Tax Service sent to inform him about unclaimed income tax refunds for the last five years. The message was suspicious, Kim said, but soon he recalled a colleague telling him about how convenient the tax refund system was set on the “Hometax” website, and how he received a swift income tax refund this May. Kim then immediately logged on to the Hometax website and soon learned that he had 150,000 won of tax rebates that remained unclaimed.

According to a Korea Employment Information Services report on the number of platform workers and their working conditions issued a year ago, the number of platform workers providing food delivery, shipping and ride hailing services stood at about 2.2 million, accounting for about 8.5 percent of the total in Korea. As demand for contact-free services rapidly grew under social distancing measures that continued during the COVID-19 pandemic, the number of individual service providers also turned to platform-based industries.

Individual service providers are those who generate income from their personal efforts or skills. Food delivery riders, private educational institutes teachers, replacement drivers, private duty nurses, event staff and so on all fall under the personal service provider category. These personal service providers are subject to 3.3 percent withholding tax (a national tax of 3 percent plus a local tax of 0.3 percent) for the compensation they receive in return for their services.

When deductions such as the personal deduction, spouse deduction and pension contribution deduction are applied, the actual amount of tax that individual service providers with low yearly incomes have to pay may be less than the 3.3 percent they have already paid. In this case, those taxpayers are eligible for a tax refund. Nevertheless, with regard to income tax refunds, the tax authority can authorize the refund only when the income tax return filing is completed. Taxpayers who do not know about tax filing rules often do not get a refund at all, or they only get a refund after hiring a tax accountant.

As a part of a “proactive governance” approach, the NTS has been striving to facilitate easier and more convenient tax refund system for individual services providers to get the refund without costly tax accounting services. Utilizing collected data, the NTS has informed about 3.03 million taxpayers for 630 billion won worth tax refunds, while bringing about major structural reform in tax return system so as to provide easier access to tax return for every taxpayer.

Moreover, starting at the end of this September, through the “Tax Refund after Due Date” notification, the NTS is helping taxpayers claim the refunds that have not been claimed for five years. The NTS has informed about 2.25 million individual service providers of 274.4 billion won worth of tax refunds. Taxpayers can receive from 10,000 won to 3.12 million won, depending on their individual taxable income.

The NTS has also streamlined the tax refund filing system so that individual service providers can claim tax refunds easily and conveniently. Individual service providers who are informed of tax refund eligibility through mobile text message can check the amount of refundable tax on the first page of the “Hometax” website or its mobile version “Hand Tax," and can use the "One-click Filling Service" which only requests the account number for refunds to complete the filing process altogether. In addition, the NTS provides a short, easy–to-follow guide video to let taxpayers know the easiest way to file for tax refunds without any fuss.

Through “Tax Refund after Due Date," the NTS anticipates real benefits to be given to individual service providers’ households. Going forward, the NTS hopes to carry out the its duties for collecting national revenue, and that more people living in Korea will experience its supportive services.

By Kim Tae-ho

Kim Tae-ho is deputy commissioner of the National Tax Agency. The views expressed in this article are his own. -- Ed.