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Tax Fraud Challenged!

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Joined: 17 Mar 2003

PostPosted: Tue Mar 18, 2003 9:22 pm    Post subject: Tax Fraud Challenged! Reply with quote

In January 2003 I went to the tax office so I could do my final tax return before leaving Korea. It was important to me to be able prove that I had paid tax in Korea, in order to avoid the possibility of being double-taxed by the Canadian government if they should decide I have been a resident of Canada, not Korea.

From the employer I had received something that he had typed up indicating the withholding tax he had deducted from my pay, but it didn't look anything like what an official document should look like; certainly nothing like a Canadian T-4.

At the tax office they gave me a pamphlet explaining the tax system, and a sample copy of the official document that the employer is required by law to give me. (During January for everyone, and within 30 days of leaving a job during mid-year.) I went away, and over the next three weeks tried repeatedly to get the official document from my former employer, without success.

Within the pamphlet was a sample of an actual letter from a foreign teacher, and reading it, it could have been written by me. It said:

"If I suspect that my Employer is has not registered me with the NTS [National Tax Service], and are not paying my taxes at all, is there any way I can find out. I do not wish to work for a dishonest employer. I have tried requesting a copy of my tax certificate from my Employers, but this has been denied."

The response from the NTS included the following:

"... your employer should accept your request to present a copy of your tax certificate. When you retire from your job before the end of this year, your employer would have responsibility to have your tax status settled for you at the time of your retirement. ... If you have any further difficulties handling your tax matters with your employer, please don't hesitate to contact one of my officers (Tel. 02-397-1592)."

After three weeks of fruitless attempts to get my tax certificate I decided to not hesitate, and went back to the tax office to enlist their help.

It took two more visits to the tax office. On both occasions they called my employer on my behalf and he lied to them, saying that I had refused to come to pick up the tax certificate, or that I had left the school before he could give me the correct one.

At all of my meetings with the tax officials I had asked if the amount of withholding tax was correct. I had used a tax calculator on their web site and it seemed to indicate that far too much had been deducted. At the third meeting they confirmed that the employer had indeed deducted too much.

I set out to find the Ministry of Labour, whose help I thought I might require. I stumbled into a labour office, the wrong one, two minutes before closing time, but the officials there stayed 30 minutes on their own time to call my employer and explain the law to him.

Progress was made. I met the employer and he provided me with the correct document. As expected, the tax that I paid was far less than what had been deducted from my pay. No explanation was made as to what the difference was, but an agreement was reached that I would return the following week and either receive an explanation (and receipts) or I would receive cash.

The employer was not present when I returned the following week, at least not initially. As per his instructions over the phone, his staff gave me cash equal to the full difference between the actual tax I paid and the tax withheld from my pay. I was told to wait for the arrival of the employer. I immediately slipped out and put the money in a safe place (my bank account) and returned to meet the employer.

At this meeting it turns out the employer was NOT willing to refund the full amount. He had no explanation for why, nor any receipts. He simply demanded the money back. I had the impression that in the intervening time he had called another school owner who had told him he should refuse to refund the money.

I no longer had the money (it was in my bank account) and had no intention of returning it anyway. He would not let me leave. I had to physically fight my way out of the room to the elevator. Once on the elevator I was free. It was a terrifying experience, but I suffered no physical harm.

The question remains, why was there a discrepancy between the tax paid and the tax withheld? The folllowing is from my contract:

"Korean income taxes and Korean National Pension scheme deductions will be withheld. 3.3% of government tax and 4.5% of pension will be deducted before payment of salary. Pension will be reimbursed when Employee is leaving Korea."

The discrepancy, the money that was in dispute, was almost precisely 4.5%. Clearly, it was my pension money, which the employer is to remit to the National Pension Corporation and which I can receive from them when I leave Korea.

But there is more. Again, from the sample letter in the NTS pamplet:

"The [National Pension] contribution of workplace-based insured persons is equally shared between the employer and the employee. The contribution rate for the insured person is 9%,"

It can be surmised that the intention of my employer was to avoid submitting the employer half of the pension contribution, while at the same time stealing my half. I visited the International Relations department of the National Pension Corporation and they confirmed that, although the employer was legally required to register his business with the National Pension Corporation, he had not done so. Nonetheless, he was still deducting my contribution from my pay, even though he was not remitting it.

It seems that this kind of tax fraud is rampant in Korea. I can assure you that government officials are helpful and the law is strong and supportive, so don't shy away from availing yourself of it if you need it. It takes time for the beaurocracy to work however. It would be worthwhile to find out in advance if you have been registered with the pension corporation (9% of your salary is no pittance, particularly since 4.5% is your own money). A complaint lodged with the Labour Relations Board can take a month to resolve, so give yourself time there too. In my case, I didn't have that kind of time, so I was very lucky to have done as well as I did.

Only continuing pressure from us, foreign workers from developed countries, is going to force Korean employers to follow the law. The Korean language school industry is a horror show and it needs badly to be cleaned up. Responsibility starts with the individual, and although I was acting for my own benefit, I'm writing this now for everyone else's.

(TO THE MODERATOR: If this message proves to be useful, please re-post it regularly.)
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Joined: 08 Mar 2003
Location: Shepherd's Bush, 1964.

PostPosted: Wed Mar 19, 2003 8:42 am    Post subject: Reply with quote

A very interesting post LBwood. I'm about to finish my contract with an employer who is very reluctant to be forthcoming about my tax and pension. Somehow you just know they are keeping part or all of your deductions. I'll use that phone number you supplied. I'm heartened to hear the Labour guys were useful.
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Joined: 20 Jan 2003
Location: Back in the saddle.

PostPosted: Mon Mar 24, 2003 12:09 am    Post subject: Reply with quote

This happens all the damn time - happened to me my first couple of jobs here back in the mists of time - but I've rarely heard of anyone being as persistent in sorting it out.

Good on ya (although I do reckon asking moderators to regularly repost your words of wisdom is a wee bit much).
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