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YouTube can bring riches and a big tax liability too

Oct 11,2019
The popularity of YouTube channels is now confirmed by the amount of income not being declared to tax authorities.

According to a parliamentary audit Thursday, the operators of seven popular YouTube channels evaded taxes on a combined 4.5 billion won ($3.7 million) in income since 2018 - and were fined a combined 1 billion won.

The details were disclosed by the ruling Democratic Party lawmaker Kim Jung-woo, who is on the National Assembly’s Strategy and Finance Committee, during a parliamentary audit of the National Tax Service (NTS) on Thursday. This was the first time information on the actual incomes made by popular YouTubers were disclosed by the agency.

According to the lawmaker, the YouTubers did not report the earnings that were made from advertisements shown on their channels. The more viewers a channel gets, the more revenue it pulls in.

It has been difficult for tax authorities to determine earnings made by people on YouTube unless they report them honestly.

The number of popular YouTube channels has grown rapidly.

According to Google Korea, channels with over 100,000 subscribers in Korea increased from 367 in 2015 to 1,275 in 2017.

YouTube isn’t the only type of internet-based business that the tax agency has struggled to impose income taxes on. So-called influencers on Instagram rake in huge income through advertisement, sponsorships or even direct sales of products through their Instagram postings.

Many popular YouTubers and Instagrammers are individuals rather than corporations, and the tax agency has to rely on their honesty when it comes to income tax.

The only other source the tax agency has to track those incomes is information collected by the Bank of Korea on offshore financial transactions of more than $10,000 a year.

Earnings made in Korea by YouTube channels are paid by YouTube’s Asia office in Singapore.

But even this method of tracking down income has a flaw: YouTubers can disperse the actual amounts they earn by having money sent to other people’s accounts.

“There are a lot of loopholes to dodge the NTS,” said representative Kim. “The tax agency needs to strengthen its system to cover all blind spots created by the new type of businesses.”

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]