Friday, August 16th, 2013
A high-ranking official at the National Tax Service said on August 14, "In order to legalize the underground economy it is essential that we find out exactly how big it is. But we have little data about it to speak of. In the second half of the year we will commission a research project to study the tax gap situation."
The tax gap is defined as the amount of tax liability faced by taxpayers that is not paid on time. Last year, the U.S. Internal Revenue Service announced the nation's tax gap as of 2006 was in the range of US$385 billion and $450 billion and the tax compliance rate was 85.5 percent.
Up until now, the government has not conducted a survey to find out the size of the underground economy, except a few cases of estimates. Early this year, Hyundai Economic Research Institute said the share of the unreported underground economy in the total was 23 percent of the GDP in 2012 at 290 trillion won from 66 trillion won in 1990. According to Friedrich Schneider, professor at Johannes Kepler University at Linz (Austria) and a prominent expert in the "shadow economy," Korea's share of the shadow economy was fourth largest in the world after those for Turkey, Mexico, and Portugal at 27.6 percent of the GDP.