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SEJONG, March 27 (Yonhap) -- South Korea's customs agency said Wednesday that it will beef up its monitoring of business activities underway in the underground economy to help raise more tax revenue for the new government in need of money to finance its campaign promises for expanded welfare programs.
To that end, the Korea Customs Service (KCS) said that it will launch a task force in charge of monitoring the underground economy and increase the overall workforce to help in efforts to better regularize the area where many illegal business activities are taking place.
"Customs-related business activities underway in the underground economy include smuggling, tax evasion and illegal currency transactions, and we estimate that the market size is at about 47 trillion won (US$42.5 billion) every year," the agency said in a press release.
"We decided to nearly double the number of personnel cracking down on such business activities from 223 to 431 and also selected specific areas where our monitoring efforts will be focused on."
Tax evasion; smuggling of gold, diamonds and other luxury products; and attempts to illegally take advantage of tax benefits under free trade deals will be closely monitored among other things, the agency said.
It will also ask for information on currency transaction reports from the Financial Intelligence Unit to better crack down on large amounts of cash-based deals, while building a system designed to secure data on offshore credit card transactions on a real-time basis.
The new chief of the National Tax Service later elaborated, noting the de facto crackdown on the black market will likely target large conglomerates, wealthy individuals and high-income earners.
"There exist concerns that the clampdown may lead to stepped-up efforts to boost overall tax revenue, putting extra burdens on ordinary citizens," Kim Duk-joong said in his inaugural speech.
Kim said the efforts will target unfair business practices by large conglomerates, as well as overseas tax evasion.
"Regularizing the underground economy...is a shortcut to establishing a fair and just taxation system, and to achieve this goal, we must secure the people's trust and support," he added.
The government move comes as it is pushing to regularize the underground economy in a bid to expand its tax revenue base and meet possibly growing financial needs for expanded welfare programs.
A local think tank estimated that South Korea's underground economy is estimated to have grown to around 290 trillion won last year, equivalent to 23 percent of the country's nominal gross domestic product.
Experts estimate that the new government might need about 135 trillion won for the next five years to fulfill major welfare programs of the new government, which include free childcare and cheaper college tuition.
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