South Korean local governments recover significant tax arrears

Local governments in South Korea have successfully recovered significant amounts of unpaid local taxes through proactive measures involving property auctions and real estate trusts.

In Suncheon, officials recovered an additional 650 million won in tax arrears by meticulously tracking the distribution process of a real estate public auction. After an initial collection attempt only secured approximately 700 million won, officials analyzed the distribution details, identified remaining dividends due to the taxpayer, and coordinated with the Korea Asset Management Corporation to seize and collect the remaining funds. This brought the total recovered amount to 1.359 billion won.

In Gangnam, authorities successfully collected 1.419 billion won in property taxes from a development corporation that had transferred assets to a trust company to avoid seizure. By applying ‘material tax liability’—a legal mechanism that allows authorities to secure unpaid taxes through the entrusted property—officials persuaded the trust company to facilitate the sale of the property. Gangnam plans to standardize this collection method into a database and has proposed institutional reforms to require trust companies to notify local governments before selling entrusted real estate.