Tax agency bolstering social welfare through Real Time Information

Sept. 28, 2022



By Kim Tae-ho

gettyimagesbank
National Tax Service Vice Commissioner Kim Tae-ho
Since the National Tax Service (NTS) was established in 1966, its main role was to collect taxes to finance the nation's revenue demands. In 2009, the NTS began distributing Earned Income Tax Credits as part of the government's effort to redistribute wealth and encourage work. Over the years, its role has grown in relation to assisting the government's welfare programs.

The NTS is being asked to undertake broader responsibilities in delivering welfare benefits, particularly in response to difficulties posed by the pandemic and economic polarization. Tax administrations worldwide are responding to calls to assist in their governments' welfare and social insurance initiatives by paying out financial subsidies to citizens and providing income-related information to other agencies.

To address challenges posed by the spread of COVID-19, the Korean government placed a high priority on building a social safety net that can protect job security for vulnerable groups. In order to support this agenda, the NTS has implemented the "Real Time Information (RTI)" program from July 2021, where the income data of day-to-day workers and independent contractors in specific industries are collected on a monthly basis.

Functioning in a similar way with the Real Time Information of the U.K., which was already started in 2013, the NTS' RTI program aims to identify social insurance beneficiaries and calculate their benefits by collecting taxpayers' income information in advance.

The RTI program has been in place for over a year. In the beginning, there were concerns that the new requirement for businesses to file information reports on a monthly basis (as opposed to the previous requirement to file every quarter or half year) would pose an additional compliance burden. To dissipate these concerns, the NTS carried out awareness campaigns through television, internet, social media and public forums to explain the welfare aspect of the new program. We also distributed simplified reporting software programs and launched relevant online portals to reduce compliance costs. Thanks to these efforts, we were able to gain cooperation from businesses and their tax practitioners.

With the program successfully settled, employers are reporting the monthly income data of paid independent contractors such as daily workers and door-to-door salespeople. Starting in November 2021, golf course owners, platform businesses and recruitment agencies were also required to file monthly reports on income paid out to golf caddies, designated drivers and parcel deliverers whose incomes were hard to figure out.

Being utilized by the Korea Workers' Compensation and Welfare Service to verify unlisted employees in the employment insurance, those data collected by the NTS have contributed to addressing blind spots in the nation's benefit system by helping 670,000 employees in the specific industries apply for employment insurance over the past twelve months.

Further to this benefit, the NTS has been active in improving the government's benefit system by sharing its data as raw data for the timely provision of loss compensation, disaster relief funds and other government-oriented benefits in times of crisis.

In the coming future, the NTS looks forward to having a more sophisticated and fully prepared RTI program with the expansion of current mobile services and a dedicated data transmission network between the NTS and the Korea Workers' Compensation and Welfare Service.

However, given that the government's ultimate goal is to offer employment insurance benefits based on individual income for all citizens, there remain challenges to be addressed in the future. That is, to identify the incomes of the self-employed and shorten the data reporting period for full-time employees and other income earners whose incomes are yet to be captured under current RTI program.

By solving the remaining tasks of the RTI program, the NTS will continue to stand as a strong supporter to build a social safety net for people's livelihoods and to remain a trustworthy government agency with its warm-hearted services.

Selected articles from The Korea Times