Incheon City Collects Overdue Taxes by Investigating Copyright Royalty Income Last Year
Incheon City is actively working to collect overdue taxes by uncovering hidden sources of revenue. On May 7, the city announced that it had collected 213 million won in delinquent taxes by seizing employment and industrial accident insurance premium refunds, becoming the first local government in the nation to do so.
This action followed a decision by the Personal Information Protection Commission at the end of last year, which notified that providing information on unpaid refunds would not violate the Personal Information Protection Act. Based on this, Incheon City obtained information on employment and industrial accident insurance premium refunds for delinquent taxpayers from the Korea Workers' Compensation and Welfare Service. From February to April this year, the city seized a total of 1,010 cases and collected the overdue taxes.
Previously, the city had requested information on unpaid refunds for delinquent taxpayers from the National Health Insurance Service and the Korea Workers' Compensation and Welfare Service. However, when the Korea Workers' Compensation and Welfare Service refused to provide the information, citing the lack of precedent and possible violations of the Personal Information Protection Act, the city requested a review by the Personal Information Protection Commission regarding potential legal violations.
If corporations or individual business owners do not claim unpaid employment and industrial accident insurance premium refunds, these funds revert to the Korea Workers' Compensation and Welfare Service after the three-year statute of limitations expires.
These insurance premiums are refunded annually through year-end tax settlements. Incheon City focused on the fact that many business owners who have closed or suspended their businesses do not claim their refunds, and utilized this as a method for collecting overdue taxes.
The city projected that utilizing employment and industrial accident insurance premium refunds could result in the collection of 200 million won annually, and if expanded nationwide, approximately 4 billion won in overdue taxes could be recovered. This initiative is currently serving as a benchmarking model for other cities and provinces.
In 2024, Incheon City also investigated copyright royalty income for local tax delinquents at 11 trust institutions registered with the Ministry of Culture, Sports and Tourism, collecting a total of 41 million won in overdue taxes from 47 individuals. This was also the first case of its kind in the nation.
Due to the nature of copyright royalties being managed and distributed through specific trust institutions, it is more difficult to verify than regular employment or business income. In particular, some delinquents have exploited this system to hide income or convert it into other assets, leaving a blind spot in local tax collection.
An official from Incheon City stated, "Until now, the collection of overdue taxes has mainly relied on disposing of assets such as real estate and vehicles. However, by identifying new recoverable resources such as refunds and copyright royalties, we are contributing to the expansion of tax revenue."
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