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Tax authorities target YouTuber millions

Direct payment makes it hard to know how much they’re earning
Nov 14,2018
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Korean tax authorities are vowing to crack down on high-earning YouTubers to ensure that they are paying their taxes in full.

Last month, National Tax Service (NTS) Commissioner Han Sung-hee promised to take measures to “prevent tax evasion” by well-paid YouTubers during the National Assembly’s annual questioning session.

Han said that while the NTS had only advised 513 YouTubers to pay income taxes in the past, it was open to launching investigations into those who have not voluntarily declared taxes.

Starting in October, the tax authorities have been looking into YouTubers’ tax returns and verifying their authenticity. The NTS plans to finish verifications by the end of the year and launch investigations into suspicious individuals from next year.

“We are now collecting information on YouTubers who are suspected of not paying taxes,” said one tax official who requested anonymity. “We receive records on individuals who earn over $10,000 in foreign currency per year from the Bank of Korea.”

With YouTube’s rising popularity in the country, the number of YouTube stars has climbed as well.

According to Google Korea, there were 1,275 Korean YouTube channels that had at least 100,000 subscribers last year. These figures have steadily increased in the last few years - only 674 channels had that many subscribers in 2016, and in 2015 there were just 368 channels.

A large number of subscribers translate to a higher view count on videos and the possibility of monetization. The video platform pays its creators 55 percent of advertisement revenue.

Although there’s still a lot of catching up to do before Korean YouTubers earn income on par with global YouTube stars, popular creators like DDotty TV, Heopop and The Great Library posted hundreds of millions of won in earnings last year. Four Korean YouTubers even earned over 1 billion won ($882,250) last year on the video platform, according to the Korea Communications Agency.

But because YouTube pays its video creators directly, it’s nearly impossible for tax authorities to assess the full scale of their earnings.

Tax returns are usually more transparent when it comes to creators who operate under multichannel networks (MCN), which are like entertainment agencies that help YouTubers with monetization and development. This is because MCNs directly pay a portion of YouTubers’ income tax, known as withholding tax, to the NTS, making it easier for the government to assess the YouTubers’ income.

“When Commissioner Han said the NTS advised 513 YouTubers to pay taxes, that figure was only referring to the number of individuals identified,” said an official. “We have developed a systematic method of managing high-earning YouTubers and will continue to investigate more individuals.”

Some experts have even suggested that the absence of proper taxation for Koreans earning through foreign companies like YouTube has hurt the Korean video content market.

“The absence of proper tax payments has helped foreign IT giants monopolize the domestic video platform market to some degree,” said Prof. Lee Kyoung-jun, who teaches management at Kyung Hee University. “It is crucial to level the playing field and make sure taxes are levied fairly across the IT industry.”


BY SOHN HAE-YONG AND KIM EUN-JIN [kim.eunjin1@joongang.co.kr]