Friday, January 16, 2015

HYSF Dishing Out The Truth: Explaining The Reaction From Korean Netizens on Tax Evasion Scandals

AKF asked me to write about this since I have experience doing small business, corporate, and high-net-worth individual taxes. There has been some "major" celebrity tax evasion scandals within the past few months, and one such scandal even forced Kang Ho Dong to "retire" temporarily. I'll do my best to explain the tax law in simplistic terms and explaining the reactions of Korean netizens, but remember two very important things: 1) I have only worked with the U.S. tax system in my internships and 2) there's so little literature on Korea's tax code in English. While what I have found is sufficient to explain the basics (it's similar to the U.S. code from a broad perspective), I obviously will not know the inner workings of the Korean tax code.

Sadly, this article won't be like one of my normal ones, so I'll get this out of the way: I would let Song Hye Kyo peg the shit out of me, figuratively and literally. Also, if you're one of those hippy "I hate all rich people because they succeeded in life and here I am bitching on some insignificant K-pop website to vent out how pathetic my life is by trying to harass the authors here" type of person, you probably won't like this article.

First, Korea has a progressive tax system. A progressive tax system means that as you move up to a higher tax bracket, you will pay more taxes overall. In this article from Korea 4 Expats, they have the 2012 tax brackets. The 2014 will be similar, with the numbers most likely ticked up for inflation, but the rates should still be the same.

Individual Income Tax Regime:
- Korea has a progressive tax rate, which in 2013 was as follows:
o Earnings up to W12million
Tax Rate is 6%
o Earnings from over W12 million to W46 million
Tax Rate is W720,000+15% of the amount over W12 million
o Earnings from over W46 million to W88 million
Tax Rate is W5,820,000 + 24% of the amount over W46 million
o Earnings over from over W88 million to W300 million
Tax Rate is W15,900,000 + 35% of the amount over W88 million
o Earnings over W300 million
Tax Rate is W90,100,000 + 38% fo the amount over W300 million
First, we're going to do the simple Korean Won to US Dollar conversion of 1,000 KRW = 1 USD. The exchange rate fluctuates daily, but the good estimate is usually the 1,000 to 1 ratio. I'll explain how a progressive tax system works since so many people misunderstand the whole concept.

Everyone pays the same rate when they are in that tax bracket. Suppose workers A and B made 10 million Won and 40 million Won, respectively. Worker A pays 6% on all 10 million of her income because she doesn't surpass the 12 million threshold. So, she pays 600,000 Won in taxes (roughly $600 USD). Worker B has a slightly more complex tax liability to calculate. Worker B, just like Worker A and everyone else, pays 6% on the first 12 million Won he makes. So, 6% times 12 million, is 720,000 Won. You think "Wait, so that's why the 15% bracket has 720,000 plus 15% of the excess." Yes, everyone pays the same 720,000 tax on the first 12 million won they make. So for the excess (40 million - 12 million = 28 million), Worker B will pay 15% on the next 28 million Won he made. So that is (28 million * 15%) = 4,200,000 Won. In total, Worker B would owe the 720,000 + 4,200,000 = 4,920,000. The system works exactly the same as you keep going up. The marginal tax rate (what tax rate you would have to pay when you made your next portion of income) is not equal to the average tax rate that most people mention.

As you can see, a progressive tax system charges you more as you move up the pay scale. It is designed this way for several reasons: the first as a political tool, and the second (of the reasons I'll tackle) is to make up the revenue the government has lost because of low-income taxpayers.

Without getting too political, a progressive tax system helps parties win elections by making it look like the rich are being punished. And for the most part, the rich have a huge burden to carry for the tax code. In a progressive tax system, the low-income taxpayers do not contribute a single fucking cent to the system. Before the tree-hugging liberal/hippie/socialist tries refuting this, I have to make a little tangent.

Taxpayers claim deductions and tax credits on their tax returns. This is to help reduce the burden taxpayers have to pay to the government. Roughly 40-50% of the population will get all of their tax withholdings back due to deductions and credits. So the bottom half, in essence, do not pay taxes at all in a progressive tax structure. The majority of the tax burden is on the top earners. However, I do not know if their are certain taxes that are exempt from being returned to the taxpayer in Korea (I couldn't find anything specific). In the United States, the Social Security and Medicare taxes are non-refundable. Those stay in the government pot.

In the United States, there's a rule when it comes to tax laws: the tax lawyers and accountants are much smarter than the dumbasses in Congress making the laws. The tax law is easy to exploit, which is why there are so many revisions to the tax code to try to close loopholes. I can't say for certain with Korea as they have only been a true democracy for a little over 20 years, but there are plenty of loopholes that the wealthy exploit. That is our job as accountants to minimize the tax burden of the people paying us. However, sometimes the rules are bent too far or there are illegal acts of tax sheltering, forcing the taxpayer to pay the original taxes plus a penalty tax. You would assume Korean netizens would be ecstatic that celebrities get caught because that's extra taxes going into the system.

You can read the netizen reactions about Song Hye Kyo and Han Ye Seul. I couldn't find any kimchi-fuck comments about Jang Geun Suk's scandal translated into English, but I'm sure they're the same. Warning: try not to read too much. The international netizen comments are even more retarded. NB is the testicular cancer of Kpop, so I don't want the radiation of retardation to affect you guys negatively.

Now to part two of the article: why do Koreans react so viciously to tax scandals? There are several reasons for this. I'll skip the stupidity reason since it is a well-known fact that these kimchi fucks are retarded. Sure, their women are hot (and even hotter once going under the knife), but the gods didn't bless the Koreans with intelligence.

The first reason is the same as in most countries: they don't understand the tax code. They probably think they're paying a large chunk of their salary in taxes when in fact around 50% of the people will get just about everything they paid in back and the rest of the middle class will get a huge chunk of what they paid in back. So, when a celebrity has a tax evasion scandal, their first thought is "I pay my taxes, you should too!" However, I already debunked that. In reality, the rich celebrities have to pay that much more taxes because the common person doesn't contribute anything. That is why rich people go to such great lengths to minimize their taxes and why I and AKF will never be unemployed. (We were smart enough to not get a liberal arts degree.)

The second reason is that Korea has a socialist government (their values may be conservative, but their government is socialist). The Korean government is heavily involved in major sectors of the economy, such as health care. Add on top of that the welfare system for retired and sick people, the populace demands the government to pay for their shit. To explain all of this will take a little while, so I'll have to explain it step-by-step.

Korea has what is commonly known around the world as "free" health care. Nothing in this world is free. It is paid through taxes. It's the same with governmental pension plans. The contributions into mutual funds (or whatever the fuck Korean financial advisers invest money into over in Korea) are taxpayer dollars. I know by know some of you fuckers are probably asking where the pictures are at, and don't worry, I have to make some pictures to explain the Ponzi scheme.

Most government-backed services are Ponzi schemes. The sooner you realize this, the sooner you'll understand the hatred for nationalization of certain industries that people have. Health care and retirement is no different.

First off, the taxes you pay do not go to benefit yourself in the future. For example, the Medicare and Social Security taxes people in the US pay do not go to benefit the taxpayer that paid them in for when the taxpayer will need them in 40 years. It goes to people currently retired and and people with severe illnesses/diseases/cancer/etc. That's the simple definition of a Ponzi scheme: the people who get in first benefit while the people at the bottom are fucked.

Since most advanced countries "promise" some sort of retirement money at a certain age, the government has to tax people currently working to pay for the people currently retired. So it doesn't matter "if you paid in" and if you think "you deserve money" when you actually retire because you're part of a Ponzi scheme. Anyone in their 20s and 30s here: you will be fucked hard up the ass when you hit retirement age if you plan to expect any sort of compensation from the government when you are ready to retire. Why is that? Well, with declining birth rates and old people living longer, we're now going to be in an upside-down pyramid.

This problem is even worse in Korea because they have the lowest birth rate in the world. As time goes on, there will be more and more people retiring and fewer and fewer people being born. There's less people to tax for an ever increasing retirement pool. That is a reason why the progressive tax system charges rich people so much for taxes to try to make up for the shortfall. Naturally, rich people scoff at the idea since they don't even need these social services in the first place, and they're already taxed at a high rate as it is.

When a normal Korean citizen who is being fucked hard in the ass by the Ponzi scheme they wanted in the first place starts to complain about rich people being taxed at high rates who have to pay all these taxes to support the normal Korean citizens who don't even contribute anything to begin with, the normal Korean citizen gets all pissed off because of the entitlement attitude. Couple that with the Korean jealousy of anyone who succeeds in life, and that is why Korean netizens bitch so much about tax evasion scandals. It's okay when they don't have to pay taxes, but FUCK THAT IF RICH PEOPLE DON'T PAY TAXES SO THAT I CAN BENEFIT OFF OF THEIR WORK THROUGH GOVERNMENT PROGRAMS.


  1. true that.... Similarly in India, majority of the population is in the agriculture economy and nearly 60% are below poverty line under WHO's criteria. ( for us its like 40% since we consider 2 meals a day as "being well off"). With all the tax evasion and this and that govt. programs etc etc 75% of the population dont pay taxes. In my State there is NO INCOME TAX. You could be a corrupt teacher and drive a BMW yet the govt. cant investigate on you . . Fck Logic. !!

    We have 3 slab rates for taxes here. 10%,20% and 30%. Pretty decent, but the 1st slab starts off at Annual Income of 160K Rupees. Due to this only 25-30% of the population are eligible for Income Tax, and you can see why India is sooooo fcked up Forever3rdWorld Nation.

    Poor people begging for more and more Freebies at the expense of hard working people. Socialist ideals are only good on paper and in history/Pol Sc text books.

    1. "Socialist ideals are only good on paper and in history/Pol Sc text books."

      Exactly. Ideals are just that: ideals. They don't mix in with reality.

    2. So is Capitalism. Not all rich people are hard working people, just like not all poor people are filthy lazy people. Life's a bitch, fair is not a rule, however you look at it.

    3. Yeah, a lot of rich people inherited their money, but someone had to work hard for it in the first place. Then again, I have better things to do than to bitch about people born into money, such as trying to maximize the amount of money I can make.

    4. Rich people inheriting their money isn't the main problem. Eventually, after generations, that money would get split up, so that isn't exactly the main issue.
      Problem is the reward system for specific jobs, and the social circumstances where you're born. A Somali accountant is never gonna earn as much as an American, or a French one, no matter how hard he works. I could argue that the hardest working dude there is rewarded less than a lazy one in the West.
      Another example, say Joe the Plumber is a hardworking dude, wakes up in the morning at 5, and does his best to provide for his family. He lives in Ukraine. That means he makes an amount that would be laughable for the average middle class American. Then we have Vitaly Klichko, he's a boxer, he works hard and makes millions of dollars. They both work hard, is it fair that one has millions while the other barely some money for potatoes? You could say "why doesn't Joe pick the same job as Klichko?" Well, birth is a gene-pool lottery. You win or you lose, not everyone is born talented.
      After all, the end result of pure Capitalism is that rich people will have more and more, the poor people will have less and less. Where does that lead? The poor will attack the rich! People are animals, and nothing underlines that more than the search for food and the fight for resources.
      Me, I will pay my taxes, even if the neighbor is a lazy fuck, because I want him to get his cheap medicare not to infect me, his little food, not to attack my house, and so on :)
      So people may scoff at socialism. I scoff at both, because both have drawbacks, and that Ponzi scheme HYS_Fag drew fits perfectly capitalism as well

    5. Both are shitty but Socialism is worse of the two , i think...

  2. Damn dude, I haven't even started working yet but you made me love my job even more. On AKF, I only got to troll tens of thousands of Kpop fans while in real life I'll get to troll hundreds of millions of people.

  3. The picture about the inverted pyramid should be put into context. The "inverted pyramid oh my god we are fucked" has been used by banks and private companies forever, so why do we still have countries with such models if they are doomed to fail?

    The reason is even if there are less people working for the retired people these people are more productive than the year before. In general every year the productivity of a worker increases, you can look at the figures but it's not difficult to imagine a person working the field today produces more than a person 100 years ago. In fact, thanks to these we have so much more social services, because people get freed and find new kinds of jobs (aka, Kpop, which was inviable 100 years ago), which again contribute to pensions and everything else, and explain global economical growth everywhere.

    Even if you imagined a world where the birth rate kept at the current level you wouldn't have a problem to pay those pensions… unless of course politicians reduce taxes for the rich, sell/privatize public firms so more money goes to private hands, artificially regulate job protection to create unemployment, etc, etc.

    There is also another way of financing pensions. In most countries pensions are funded by the working class: if you have higher unemployment, you have less money for pensions. On the other hand the financial sector is not taxed at all. It would be enough to put a tax on financial operations to redirect some of the enormous wealth being produced into keeping people alive, but fuck no, capitalism won't allow that.

    Markets won't even accept a 2% tax on operations, even though that has been calculated to be enough to end hunger in the whole world if put into practice. But then you go to a shop to buy food and depending on the country you pay a VAT of 5%, 10% or even 20%.

    People lost long ago against capitalism, even in countries posing as socialist. Life for most is a matter of being fucked less in the ass than your neighbour. If the welfare system of a country is going bankrupt that is because the political parties are involved and benefit directly, not because there are more old people and less births.

    1. The productivity can't go up forever. At a certain point the pyramids that HanYeSeul_Fag drew will become reality. So far, in the last 200 years or so, where the population growth took of, governments have found ways to delay that reality. But it will come eventually, for a couple of reasons:
      - innovations rate that fuel economy can't keep up with economic demands anymore
      - population growth can't be beneficial anymore, as we approach the limits of what Earth can sustain.
      - people live longer (dem fuckers) so they need more pensions.
      Either way, capitalism or socialism, somebody's gonna get really fucked!

    2. Indeed productivity can't go up forever. But if the pyramids that HanYeSeul_Fag drew are to become reality, the birth rate would be 1 or less than 1, meaning population wouldn't grow either but stabilise or decay. It would be enough then to keep the productivity and share some of the accumulated wealth, since productivity has gone faster up than population rate so far. The profits have gone to a few hands only, which is the real issue.

      In any case arguing over this is not very important. I agree with your last statement because we are already past world peak oil. Oil production is declining and even the producers have finally announced so after a few years of trying to hide or dismiss the facts as irrelevant. Without energy we can't sustain production, without production, productive economies collapse. It may take one or maybe two decades, but we will surely end up killing each other for the control of the remaining available fossil energy sources as countries everywhere start going through serious energy cuts just to be able to survive.

    3. Peak oil is nothing to worry about. It's a good thing if anything. The Stone Age didn't end when the world ran out fo stone.

  4. For a second I sat there and thought to myself "What does HYSF stand for? Help yourself, faggot?".

    It was interesting to read, even if I don't agree with your negative view on social health care.

  5. Young people who trust in government to provide pensions will surely be disappointed; several countries have already raised the retirement age, and that is only a small taste of what is to come.

  6. How do you figuratively peg someone? Why do Koreans have the lowest birthrate in the world? Will Han YeSeul ever marry Teddy?

    The questions this article raises continue, but I won't bother listing them all here.

  7. What? I thought the world needs less people


    2. Cheers to the greenest people on Earth! :))

  8. My head hurts. Before it was Marxism, and now tax law. Please have mercy on me who's ignorant about economy and doesn't speak fancy English (since English is not my first language).

  9. If you and AKF obtained information(by any means) to help you invest in an area like land, commodities, or even shares, what will the 2 of you invest in?

    1. None, because we'd go to jail for insider trading.

  10. And be glad that we do not experience regressive tax income.

  11. Damn, it's cool that you applied your tax/accounting information to write a kpop article. I'm jealous LOL

  12. There's a lot of shit with chaebols and business in korea too which also is issues with why people respond how they do. The last president lee was seen as too cozy with business. Since the asian market crash of the late 90s sk has been using hallyu as a giant commercial for the country. Trade deals for the govt to exporting goods like samsung to makeup and kpop and dramas. The celebs in korea are the face of the country. Them not paying taxes is also bad in terms of social responsibility which koreans in sk are big on too. Of course there's so much corruption in business and hallyu is no exception. Im about to get a paralegal degree and am being trained now with bankruptcy so looks like we're both good to go. And from what I've seen too with sk and issues with taxes and laws things don't seem that different from the us which doesn't surprise me considering the us relationship with sk since the korean war......

  13. that's a lot of words to say hardly anything