Gangnam District Uses AI to Identify Overlooked SME Deductions and Support Hidden Tax Refunds

First in the Nation: 32 Million Won in Correction Claims Received

Gangnam District in Seoul has become the first in the nation to establish an automated screening system using generative artificial intelligence (AI) to proactively identify businesses that have missed out on employment support tax deductions for small and medium-sized enterprises (SMEs), resulting in tangible tax refund outcomes.

Gangnam District Office exterior. Courtesy of Gangnam District Office.

The SME employment support deduction is a system that allows SMEs employing more than 50 workers by hiring additional employees to deduct a portion of the increased labor costs from their taxable income, according to a statutory calculation formula.

Gangnam District combined AI’s legal interpretation capabilities with its own “SME Status Verification System” to conduct a comprehensive review of tax data and automatically identify cases where deductions were omitted or excessively reported. Through this process, approximately 700 suspicious cases were extracted, and notification letters were sent to 176 business establishments with a high likelihood of being eligible for the deduction. As a result, within two weeks, three businesses submitted correction claims totaling 32 million won, leading to refunds, and related inquiries continue to be received. Correction claims will be accepted through the end of the year, so the number of beneficiary companies is expected to increase further.

This AI-based system is being recognized as a leading example of proactive administration, not only improving administrative efficiency but also delivering tangible benefits to small business owners and micro-enterprises who were previously unable to claim deductions due to lack of awareness. All data processing is conducted locally without external transmission, ensuring both personal information protection and system stability.

Gangnam District Mayor Cho Sungmyung stated, “This system, which utilizes generative artificial intelligence, is a new innovation model that achieves fair tax administration through technology and protects the rights and interests of struggling SMEs and small business owners. We will continue to pursue effective and proactive administration by leveraging technology in the future.”