Uncollected tariffs top W2.1tr, with write-offs already at W29b through July

The government failed to collect more than 2.1 trillion won ($1.49 billion) in tariffs last year, according to data released Thursday. Uncollected tariff arrears that have permanently lapsed under the statute of limitations already reached 29 billion won in just the first seven months of this year.

The figures come from data that People Power Party lawmaker Im Yi-ja, a member of the National Assembly's Finance and Economy Planning Committee, obtained from the Korea Customs Service. They show that total uncollected tariffs rose 560 billion won, or 35.5%, from 1.58 trillion won in 2021 to 2.14 trillion won last year.

Uncollected tariffs refer to taxes the government is owed but has not yet managed to collect, with the amounts accumulating over time.

The annual totals have risen consistently: from 1.58 trillion won in 2021 to 1.9 trillion won in 2022, 1.99 trillion won in 2023, and 2.08 trillion won in 2024, before reaching 2.14 trillion won last year. As of July this year, the running total stands at 1.73 trillion won.

Tariff evasion accounted for the largest share of last year's uncollected amount. Arrears stemming from fraudulent or omitted declarations of import prices or quantities reached 1.78 trillion won, or 83.4% of the total.

Post-clearance audit assessments — cases where errors or underreporting were detected after goods had cleared customs — accounted for 290.5 billion won, while clearance-stage arrears totaled 54.5 billion won and improper refunds came to 9.4 billion won.

A more pressing concern is a sharp jump this year in write-offs — tariff arrears that can no longer be collected because the statute of limitations has expired.

Under the Customs Act, unpaid arrears become permanently uncollectable once the statute of limitations runs out: five years for amounts below 500 million won, and 10 years for amounts of 500 million won or more.

Annual write-offs over the past five years totaled 46 billion won in aggregate — 4.5 billion won in 2021, 17.8 billion won in 2022, 5.2 billion won in 2023, 10.4 billion won in 2024, and 8.1 billion won last year.

The pace has accelerated sharply this year. Write-offs through July have already reached 29 billion won — 63% of the entire five-year cumulative total and 3.6 times last year's full-year figure.

Im also flagged a separate case in which the Korea Customs Service lost an administrative lawsuit brought by a habitual non-payer in June, resulting in the cancellation of tariff assessments worth 398.1 billion won.

Im tied the issue to the government's tax reform package, arguing that existing tariff arrears must be collected before the government pursues new revenue measures. The package projects a tax revenue increase of 3.44 trillion won over the next five years.

"Allowing legitimately owed arrears to pile up and disappear through the statute of limitations seriously undermines fairness toward compliant taxpayers," Im said. "The government is failing to collect taxes it is already owed while piling an additional 3.44 trillion won in burdens on the public over five years through its tax reform package."

Im added that before imposing new taxes on the public, the government should build a fundamental arrears management system capable of detecting and collecting deliberately evaded tariffs and concealed assets at an early stage, in order to normalize tax revenue.