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Mr. A is a lawyer with a private office in Gangnam, Seoul. He hasn’t paid any taxes properly, including property taxes for several years. The reason was that “we are seeing a deficit due to office operation”. The IRS and local tax offices have been watching Mr. A for a long time, but there was no way to prove Mr. A’s actual income and wealth. This is because, in the investigation of the apartments that were reported to move in, the circumstances of concealing the property could not be found. However, the National Tax Service Big Data Center played a role. Analysis of tax invoices, cash receipts, and credit card payment details revealed that there is a high possibility of actually living in a multi-purpose apartment in Bundang, Seongnam, Gyeonggi Province. Eventually, after additional investigations such as interrogation, the IRS investigation team revealed that Mr. A resides in a large 290m2 residential type of the complex. The investigation team seized 200 million won worth of hidden property, including 36 million won in cash.
○ 85% hit rate for finding residence for nonpayers
Tax evasion techniques are becoming more and more sophisticated, such as taking domestic assets overseas and bringing them back in again. As real estate prices rise and the subject of inheritance and gift tax is increasing, front-line tax offices are also struggling to classify suspects of evasion. The National Tax Service Big Data Center was launched in June 2019 to cope with such changes. Based on various data secured by the National Tax Service, it is making results in a short time. The performance of collecting evasion tax by tracking the property of high-payers increased from 17.8 billion won in 2017 to 18.8 billion won in 2018 and 20.2 billion won in 2019.
The field that is showing the most power is the determination of the real residence of a delinquent person like Mr. A. There were many cases where the front-line tax offices could not find the arrears even though they were aware of the fact of the arrears, so they could not pay the back taxes. The National Tax Service’s Big Data Center uses a variety of data to find the real residence of delinquents with a high hit rate. According to the results of a pilot survey of 28 long-term delinquents, 24 residences were found, with a hit rate of 85%.
In the same way, the family of Mr. B, who was found to be living in the province on the resident registration certificate, was also found. The National Tax Service’s Big Data Center, which judged that there were no signs of living in the house where they were reported to move in, designated an expensive apartment in Seoul as their actual residence. The National Tax Service collected 500 million won in arrears, including 100 million won in cash.
○ Overseas fund transactions are also made with big data
Even self-employed people who evade VAT through transfer of their name are difficult to escape the surveillance network of big data. Self-employed people are classified as simple taxpayers if their annual sales do not reach 48 million won, and their tax burden is greatly reduced compared to general taxpayers who generate more sales.
Mr. C was an example of abusing such tax laws. Whenever their annual sales exceed 48 million won, they registered a business under the name of a relative or acquaintance, and then reported the sales generated in their own store under the name of another store. Through this, they were able to maintain their status as simple taxpayers and receive preferential tax treatment. The National Tax Service’s Big Data Center has detected such a breakthrough based on business changes and income details of the people around C.
Kang Jong-hoon, head of the National Tax Service’s Big Data Center, said, “It is a system that allows computers to select targets for evasion by entering major tax evasion patterns that occurred in the past and inserting recent data,” he said. “We are gradually increasing the scope of application of big data technology.”
Big data analysis also opens up the possibility of investigation into areas that were not possible in the past. Representatives are Koreans who have opened accounts abroad with separate identification cards such as passports, and foreigners working in Korea. Investigations on fund transactions and tax payments were conducted based on resident registration numbers, making it difficult to access problems outside of this category. However, the National Tax Service is developing a technology to find out the relationship between overseas accounts and a specific person through pattern analysis through big data.
However, it is explained that the general public does not need to worry about the big data analysis targeting the high-income and frequent arrears. An official from the National Tax Service said, “Big data only tells us the degree to which we need to look in, but the actual investigation needs to be examined by the IRS staff. There is a limit to the overall application of tax payment verification.”
Reporter Noh Kyung-mok [email protected]
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