Gov’t flags possible tax evasion among pension exemption applicants

Approximately 50,000 subscribers to South Korea's national pension system, who applied for an exemption from payment obligations due to a lack of income, have been reported to have traveled overseas more than four times. Around 1,600 individuals own more than one foreign-made vehicle, raising suspicions of tax evasion and unpaid insurance contributions. Authorities believe many of these individuals may be misreporting their income to avoid taxes and pension contributions.

Data submitted by the National Pension Service (NPS) to Rep. Kim Seon-min of the Rebuilding Korea Party, a member of the National Assembly's Healthcare and Welfare Committee, shows that as of June 2024, 2,868,359 individuals (13% of 22,055,846 total subscribers) were exempt from making contributions to the national pension.

The exemption, designed to relieve financial strain during periods of unemployment, business suspension, or academic study, allows subscribers to temporarily pause payments. The period during which individuals are exempt from contributing to the national pension due to circumstances like unemployment, academic study, or business suspension is not counted towards their official subscription period. According to data from December 2022, around 2.55 million subscribers were exempt due to unemployment, 330,000 for academic study, and 70,000 because of business suspension. This policy impacts the total subscription period, which could affect the eventual benefits received by these individuals.

Among the exempt subscribers, 51,488 reportedly traveled abroad over four times, while 2,581 made more than 11 trips. Additionally, 2,785 exempt subscribers own cars with engine displacements over 3,500 cc, incurring annual car taxes of more than 910,000 won, and 1,683 own multiple foreign-made cars, with 33 individuals owning over five.

The NPS calculates contributions based on labor and business income, meaning those without reported income are not required to contribute, even if they possess significant assets. Officials suspect that frequent travelers among exempt subscribers may have unreported income. If these individuals fall into poverty without paying into the system, the government may need to provide support through taxpayer funds, potentially placing an undue burden on compliant taxpayers.


Sung-Min Park min@donga.com