The market for platform-based creators, including YouTubers and TikTokers, is rapidly growing, but income from TikTok creators is significantly harder for tax authorities to track compared to YouTubers. This difficulty arises from a complex settlement structure involving overseas payment processors, leading to a high risk of income reporting omissions.
According to a report by the Korea Institute of Public Finance titled "Current Status of Data Collection and Taxation Challenges for TikTok Income Capture" released on May 22, the revenue structure of TikTok is much more complicated than that of YouTube, creating a significant potential for tax evasion.
YouTube's advertising revenue payment structure through Google AdSense is relatively straightforward. In contrast, TikTok's revenue streams are multifaceted, including live sponsorships, advertising and sponsorship deals, external affiliate commissions, and video rewards. Many of these transactions are processed through overseas payment processors like PayPal and Payoneer, making it difficult for tax authorities to track income flows.
Additionally, TikTok's structure allows creators to accumulate earnings in their accounts before requesting withdrawals, which can delay income reporting and increase the risk of omissions. There are also instances where the timing of service provision and actual payment differs, complicating the application of the accrual accounting principle.
In contrast, the tax infrastructure for YouTubers is being rapidly developed. The National Tax Service established a new industry code for "individual media creators" in 2019, and the number of individuals filing comprehensive income tax returns in this category surged from 2,776 in 2019 to 34,219 in 2021, an increase of more than 12 times. During the same period, reported income rose from 87.5 billion won to 858.9 billion won, nearly a tenfold increase.
The National Tax Service is enhancing its management of overseas platform-based income by utilizing foreign exchange transaction data and comprehensive income tax return information. Foreign currency earnings exceeding $10,000 annually must be reported to the National Tax Service, and repeated large foreign currency deposits may be subject to anti-money laundering (AML) analysis.
Many countries are also tightening information reporting obligations for platform operators. The United Kingdom and France require platform operators to report transaction information, while China mandates that platform companies regularly submit creator identity and income information.
The researchers suggest that South Korea should also improve its data collection and reporting systems for platform-based income and enhance mechanisms for capturing foreign currency earnings through overseas payment processors. They also emphasize the need for expanded international information exchange and measures to encourage voluntary reporting.
* This article has been translated by AI.
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