Taxation Issues for Platform Workers

Platform workers are a new category of laborers who provide services or labor through digital platforms. They exhibit a dual nature of both autonomy and dependence. While they are typically classified as self-employed under contractual terms, in practice, they are subject to substantial control by platforms through algorithm-based task assignments, performance evaluations, and compensation systems—characteristics similar to those of employees under labor law. As of 2023, the number of platform workers in South Korea is estimated at approximately 2.4 million, accounting for about 8.5% of the total workforce. Major occupations include food delivery, substitute driving, translation, and IT development. These workers experience wide income disparities across job types, low employment stability, and limited access to social insurance systems—evidenced by an employment insurance coverage rate of only 48.2%. Under current tax law, their income is generally classified as business income or other income because of the absence of formal employment contracts and the performance-based nature of their earnings. Although a 3.3% withholding tax is applied, the self-reporting system leads to high risks of underreporting, and many workers lack the tax knowledge needed to fulfill their filing obligations. Labor and tax laws interpret the legal status of platform workers differently. Labor law considers the actual level of control to determine worker status, potentially recognizing platform workers as employees. However, tax law treats them as independent contractors based on contractual independence, assigning tax obligations to the individuals themselves. This legal inconsistency results in unequal tax treatment and a lack of fairness. To address this, several European countries have introduced the concept of “quasi-employees”—workers who, while formally self-employed, receive certain labor protections and simplified tax procedures (e.g., simplified bookkeeping, partial withholding). South Korea has relatively advanced tax infrastructure, operating electronic filing support systems like the “Simplified Filing” and “One-Click Refund” programs. In contrast, Japan relies largely on voluntary compliance and has only recently begun considering the implementation of the OECD Model Reporting Rules. In conclusion, it is urgent to reform the tax system to better reflect the actual working conditions and legal status of platform workers. Labor law must refine the criteria for determining employee status, while tax law should enhance flexibility and improve support for self-filing. Strengthening platform operators’ data reporting obligations is also essential to ensure income transparency and achieve tax justice in the digital economy.