[The Editors' Verdict] National Tax Arrears Reach 110 Trillion Won...How to Stop Salary Workers from Bleeding

Year-end Tax Settlement Brings Mixed Fortunes as Earned Income Tax Nears 70 Trillion Won
“Are Salary Workers Easy Targets?” Growing Discontent Amid 50% Recovery Rate for Tax and Fine Arrears
War on Arrears in the First Half... Hopes for Public Debat

Lee Kyungho, Business Editor

Every February, the fortunes of office workers diverge. Some receive their year-end tax settlement refund as a “13th-month bonus,” while many others feel as if unexpected additional payments are snatching away their hard-earned cash. Beyond individual emotions, the reality shown in the numbers is even colder. Last year, income tax revenue from wage and salary earners amounted to about 68.4 trillion won. This figure is more than double that of 10 years ago, and its share of total national tax revenue has surged from the 12% range to the 18% range. Unlike corporate tax, which fluctuates with company earnings, income tax withheld steadily from monthly paychecks has effectively become the state’s most reliable “cash-cow tax base.”

The fundamental principle of taxation is “a broad tax base and low tax rates.” However, Korea’s reality is far from this. One out of three workers (33%) is exempt from tax and pays not a single won, while the top 12% of high-income earners shoulder 76% of total income tax. On top of this, prices have risen while real wages have stagnated, and the progressive tax structure means only taxes keep increasing, turning honest taxpayers into easy targets. This is why dissatisfaction that “the government squeezes only ordinary workers who are easy to pick on” has reached a breaking point.

The fairness of collection is also a problem. National tax arrears exceeded 100 trillion won in 2022, reaching 102.5 trillion won, and then increased further to 110.7 trillion won in 2024. As of 2024, the total amount newly in arrears (the previous year’s carried-over arrears plus new arrears in the current year) was 41.9603 trillion won, but the amount actually collected and cleared was only 20.94 trillion won, about half. Administrative fines handled by the police for violations such as speeding, illegal parking or stopping, traffic signal violations, and exclusive lane violations show a similar pattern. As of 2024, such fines totaled 2,046.482 billion won, but the collection rate was 54.8%, leaving 1,083.736 billion won uncollected. Leaving arrears unattended sends two signals to society. One is the perverse incentive that “you can get away with it if you just hold out,” and the other is the cynical view that “those who pay faithfully are the losers.” Tax justice is completed not by the tax rate but by enforcement. It is in this context that National Tax Service Commissioner Lim Gwanghyeon remarked that “there is no royal road to clearing tax arrears.”

To correct such unfairness, the National Tax Service and the police have declared war by launching “arrears management task forces.” The National Tax Service’s “National Tax Arrears Management Task Force” plans to deploy a workforce of 2,000 people over three years to conduct an almost exhaustive fact-finding investigation into 1.33 million delinquent taxpayers. The police also plan to select a total of 100 arrears management officers within the first half of this year at 18 city and provincial police agencies nationwide, including the Seoul Metropolitan Police Agency, and at 60 police stations. Both institutions will need the same dogged persistence in pursuing arrears to the end as shown by the Seoul Metropolitan Government’s “38 Tax Collection Division.”

The war on arrears is only the beginning, and a fundamental discussion on institutional reform must follow. If the key issue in the first half of the year is arrears collection, then the key issue in the second half should be “tax equity.” First, tax expenditures, which are expected to exceed 80 trillion won this year (through tax exemptions, income deductions, and tax credits), need to be reduced, and effective tax rates must be adjusted rationally. The low overall tax burden rate also needs to be normalized. Korea’s tax burden rate in 2024 was 17.6% (18.5% in 2025), ranking 35th out of 38 member countries of the Organisation for Economic Co-operation and Development (OECD), near the bottom. The gap with the OECD average (around 25%) exceeded 7 percentage points.

Reform of income tax on wage and salary earners is also necessary. On February 18 last year, when he was still leader of the Democratic Party, President Lee Jaemyung posted on Facebook under the title “Are Wage Earners Just Easy Targets?” and wrote, “While ultra-rich people have been given tax cuts, wage earners have in effect been subjected to tax increases. I believe this is something that needs to be fixed.” The political establishment appeared receptive, but the issue was left unresolved. President Lee is unlikely to have forgotten, and given the political reality that it is difficult to bring up taxes ahead of local elections, there is hope that a public debate on this will be launched in the second half of the year after the local elections. Lee Kyungho, Business Editor