april 2011
DESCRIPTION
Modernization of Korean Tax Administration. Prepared for the first Joint ATAF-Korea Conference On Domestic Resource Mobilization. April 2011. National Tax Service. Contents. Overview of NTS History of Tax Administration Development Major Challenges and Responses - PowerPoint PPT PresentationTRANSCRIPT
April 2011April 2011
Modernization of Korean Modernization of Korean
Tax AdministrationTax AdministrationPrepared for the first Joint ATAF-Korea Conference
On Domestic Resource Mobilization
National Tax ServiceNational Tax Service
Contents Contents
I.I. Overview of NTS Overview of NTS
II.II. History of Tax Administration DevelopmentHistory of Tax Administration Development
III.III. Major Challenges and ResponsesMajor Challenges and Responses
IV.IV. Enhancing Tax Resource ManagementEnhancing Tax Resource Management(TRM)(TRM)
V.V. Lowering Compliance cost : Hometax serviceLowering Compliance cost : Hometax service
VI.VI. Policy ImplicationsPolicy Implications
I.I. Overview of NTS Overview of NTS
II.II. History of Tax Administration DevelopmentHistory of Tax Administration Development
III.III. Major Challenges and ResponsesMajor Challenges and Responses
IV.IV. Enhancing Tax Resource ManagementEnhancing Tax Resource Management(TRM)(TRM)
V.V. Lowering Compliance cost : Hometax serviceLowering Compliance cost : Hometax service
VI.VI. Policy ImplicationsPolicy Implications
I I Overview of NTS Overview of NTS Overview of NTS Overview of NTS
1. Role and Functions
1. Brief structural overview
- Office of Tax and Customs, MOSF: Coordinates tax & customs policies
- Taxation Bureau was moved out of MOSF in 1966 to form NTS
2. Main functions : Administration of
national/internal taxes
- Direct taxes: Personal income tax, corporate income tax, inheritance tax, gift tax, comprehensive real estate holding tax
- Indirect taxes: VAT, individual consumption tax, liquor tax, stamp tax, securities transaction tax
3. Non-tax functions
- Welfare functions: Administration of Earned Income Tax Credits (EITC)
- Liquor license control
1. Brief structural overview
- Office of Tax and Customs, MOSF: Coordinates tax & customs policies
- Taxation Bureau was moved out of MOSF in 1966 to form NTS
2. Main functions : Administration of
national/internal taxes
- Direct taxes: Personal income tax, corporate income tax, inheritance tax, gift tax, comprehensive real estate holding tax
- Indirect taxes: VAT, individual consumption tax, liquor tax, stamp tax, securities transaction tax
3. Non-tax functions
- Welfare functions: Administration of Earned Income Tax Credits (EITC)
- Liquor license control
2-1. Organizational Structure (1)
Seoul RegionalTax Office
24 District Tax Offices
Jungbu RegionalTax Office
26 District Tax Offices
Daejeon RegionalTax Office
14 District Tax Offices
Gwangju RegionalTax Office
14 District Tax Offices
Daegu RegionalTax Office
13 District Tax Offices
Busan RegionalTax Office
16 District Tax Offices
NTSCommissioner• Customer Satisfaction Center
• Tax Officials Training Institute• Technical Service Institute
• Human Resources
H.R office
• System Planning Office• System Operation Office• Information System
Development Office #1• Information System Development Office #2
Information System Bureau
• Audit Office
Audit and Inspection Bureau
• Taxpayer Advocate Office• Tax Appeals Office #1• Tax Appeals Office #2
Taxpayer Advocacy Bureau
• International Cooperation Office
• International Tax Resource Management Office
International Taxation Bureau
• Policy Coordination Office• Planning & Finance Office• Statistics Planning Team• Emergency Plannign Office
Planning & Coordination Bureau
Collection & Legal Affairs Bureau
• Tax Collection Div.• Legal Affairs Div.• Tax Ruling Div.• Public Relations Div.
Individual Taxation Bureau
• Value Added Tax Div.• Individual Income Tax Div.• Electronic Tax Resource
Div.
Corporate Taxation Bureau
• Corporation Tax Div.• Withholding Tax Div.• Excise Tax Div.
Property Taxation Bureau
• Real estate Transaction Management Div.
• Property Related Tax Div.• Comprehensive Real
Estate Holding Tax Div.
Investigation Bureau
• Investigation Planning Div.• Investigation Div. #1• Investigation Div. #2• International Investigation
Div.• Investigation Intelligence
Div.
Earned Income Tax Credit Bureau
• Earned Income Tax Credit Operations Div.
• Income Source Management Div. #1
• Income Source Management Div. #2
2-2. Organizational Structure (2)
< Main Organizational Reform (1999-2001) >
From geographical area-based to functions-based
From vertical command-based to horizontal cooperation-
based
- HQ: Planning body
- Regional tax offices: Auditing body
- District tax offices: Taxpayer servicing body
First government agency to adopt taxpayer’s ombudsman
system
< Main Organizational Reform (1999-2001) >
From geographical area-based to functions-based
From vertical command-based to horizontal cooperation-
based
- HQ: Planning body
- Regional tax offices: Auditing body
- District tax offices: Taxpayer servicing body
First government agency to adopt taxpayer’s ombudsman
system
II II History of Tax Admin. DevelopmentHistory of Tax Admin. DevelopmentHistory of Tax Admin. DevelopmentHistory of Tax Admin. Development
1960s1960s
Established NTS in 1966 President Park : “A Belief that higher tax revenue is possible by enhancing tax admin. without raising tax rate”
Achieved a goal of 70M USD tax revenue
Focused on increasing tax revenue by intensive tax audit
Established NTS in 1966 President Park : “A Belief that higher tax revenue is possible by enhancing tax admin. without raising tax rate”
Achieved a goal of 70M USD tax revenue
Focused on increasing tax revenue by intensive tax audit
1970s1970s
1-1. History : 1960s ~ 70s
Built a data processing room in 1970 the number of tax data (million) : 450(‘65) 1560(‘69)
Introduced VAT in 1977
Internal tax revenue over 1B USD in 1975
ratio of internal tax revenue to annual revenue : 64%(‘66 : 45.5%)
Built a data processing room in 1970 the number of tax data (million) : 450(‘65) 1560(‘69)
Introduced VAT in 1977
Internal tax revenue over 1B USD in 1975
ratio of internal tax revenue to annual revenue : 64%(‘66 : 45.5%)
1980s1980s
1990s1990s
1-2. History : 1980s ~ 90s
Efforts to improve taxpayers service : central counseling center, mobile counseling
Endeavor to eliminate the underground economies Enforcing tax admin. in metropolitan area intensively Development in International Taxation
Efforts to improve taxpayers service : central counseling center, mobile counseling
Endeavor to eliminate the underground economies Enforcing tax admin. in metropolitan area intensively Development in International Taxation
Reformed Organizational structure to function-based
Launched Tax Integrated System (TIS) in 1997
Strengthened taxpayer’s rights : Taxpayer Advocacy Bureau, legalization of appeal before assessments
Reformed Organizational structure to function-based
Launched Tax Integrated System (TIS) in 1997
Strengthened taxpayer’s rights : Taxpayer Advocacy Bureau, legalization of appeal before assessments
2000s2000s
1-3. History : From the 2000s
(internal) Efficiency, Specialization, Transparency, Taxpayers Convenience, etc
(external) Mature socio-economic circumstances, IT infrastructure, Proliferation of the legitimacy of taxation
(internal) Efficiency, Specialization, Transparency, Taxpayers Convenience, etc
(external) Mature socio-economic circumstances, IT infrastructure, Proliferation of the legitimacy of taxation
The main factor in modernization of Korean Tax Admin.The main factor in modernization of Korean Tax Admin.
Enhance Tax Resource Management Build the basis of e-Tax admin. : Hometax service
Enlarge taxation infrastructure : Cash Receipt System, etc Increase the capability to prevent offshore tax evasion
Enhance Tax Resource Management Build the basis of e-Tax admin. : Hometax service
Enlarge taxation infrastructure : Cash Receipt System, etc Increase the capability to prevent offshore tax evasion
2. Relevant Statistics : Tax Revenue
‘97
‘08
63.6
157.5
147%
Revenue by NTS(General+ Special Account)
(Billion USD)
‘97
‘08
14.8
36.3‘97
‘08
19.4
43.8
‘97
‘08
9.4
39.1
145%
125%
315%
Income Tax(Unit : Billion USD)
VAT(Unit : Billion USD)
Corporate Tax(Unit : Billion USD)
Ratio of Revenue by NTS(151 Billion USD) to Annual Revenue(172 Billion USD, ‘08) is 87.7% (General Account)
The Growth of GDP : 532.3 Billion USD(‘97) ⇒ 930.9 Billion USD (‘08) : up 75 %
‘86
10.0
III III Major Challenges and Responses Major Challenges and Responses Major Challenges and Responses Major Challenges and Responses
Major Challenges and Responses
Tax revenue = (tax base) x (tax rate) The role of Tax Office is to broaden tax base by taxing
the informal sector Enhancing Tax Resource Management (TRM)
To Secure tax revenue
Compliance cost is additional burden to taxpayers Consider how to increase revenues without raising
compliance cost E-filing service, simplified tax forms, e-tax invoices,
etc
To Lower Compliance cost
1
2
IV IV Enhancing Tax Resource Management Enhancing Tax Resource Management Enhancing Tax Resource Management Enhancing Tax Resource Management
1. Structure of Tax Resource Management
Registration Mgt.Registration Mgt.
• Preliminary checkup
• Follow-up mgt.
• Suspension & Closure mgt.
• Preliminary checkup
• Follow-up mgt.
• Suspension & Closure mgt.
Efforts to elevate the systematic connection between Registration, Tax Information and Filing & Audit Mgt.
Efforts to elevate the systematic connection between Registration, Tax Information and Filing & Audit Mgt.
Tax Information Mgt.Tax Information Mgt.
• Tax invoice data mgt.
• Credit card data
• Data from audit, etc
• Tax invoice data mgt.
• Credit card data
• Data from audit, etc
Filing & Audit Mgt.Filing & Audit Mgt.• Guidance for Filing
• Follow-up inspection & Mgt. for non-reporters
• Individual mgt. for vulnerable business
• Guidance for Filing
• Follow-up inspection & Mgt. for non-reporters
• Individual mgt. for vulnerable business
2-1. Registration Mgt. - Preliminary checkup
ApplicationforRegistration
ApplicationforRegistration
Sorting of preliminary checkup (Service div.)
Sorting of preliminary checkup (Service div.)
Designating an official
(VAT, income tax div.)
Designating an official
(VAT, income tax div.)
Indirect InspectionIndirect Inspection
On-siteInspectionOn-siteInspection Issuance Issuance
Flow chartFlow chart
Pre-searching system : Applicants involved in document frauds, disguised credit card issuance, unlicensed liquor trade, etc
Specific business needed to be under control (ID in disguise) : entertainment business, jewelry retailer, money lending, etc
Pre-searching system : Applicants involved in document frauds, disguised credit card issuance, unlicensed liquor trade, etc
Specific business needed to be under control (ID in disguise) : entertainment business, jewelry retailer, money lending, etc
▣ Objects of pre-checkup▣ Objects of pre-checkup
2-2. Registration Mgt. - Follow-up Mgt.
Objects : Applicants before business commencement and suspicious of identity disguise and disguised issuer, etc
On-site inspection within 2 months after registration
Filing (or payment) twice in normal : finish the follow-up mgt.
Confirmed as wrong issuance : eliminate a registration
Objects : Applicants before business commencement and suspicious of identity disguise and disguised issuer, etc
On-site inspection within 2 months after registration
Filing (or payment) twice in normal : finish the follow-up mgt.
Confirmed as wrong issuance : eliminate a registration
1. Follow-up mgt.1. Follow-up mgt.
Objects: Informal businesses rarely registered
When: Within 4 months after final filing
How to address
- non-registered trader : registered by authority, impose taxes
- disguised trader : correct ID, impose taxes on real trader
- closed trader : eliminate a registration
Objects: Informal businesses rarely registered
When: Within 4 months after final filing
How to address
- non-registered trader : registered by authority, impose taxes
- disguised trader : correct ID, impose taxes on real trader
- closed trader : eliminate a registration
2. A general inspection 2. A general inspection
3-1. Tax Invoice Data Mgt.
A receipt given to a purchaser from a supplier to prove collection of VAT, when the supplier provides goods or services
A receipt given to a purchaser from a supplier to prove collection of VAT, when the supplier provides goods or services
▣ What is a tax invoice?▣ What is a tax invoice?
3-2. Tax Invoice Data Mgt.
Taxpayers have the original TIs and submit the sum table of TIs when filing VAT
Taxpayers have the original TIs and submit the sum table of TIs when filing VAT
▣ How to file a tax invoice?▣ How to file a tax invoice?
3-3 . Tax Invoice Data Mgt. – Mis-matching Data
1. Mis-matching tax invoices
- 2 type: turnover(under-reported), purchases (over-reported)
- impose penalty taxes and readjust
1. Mis-matching tax invoices
- 2 type: turnover(under-reported), purchases (over-reported)
- impose penalty taxes and readjust
2. Suspicious sum table of TIs (wrongfully deducted input tax)
- wrongful transaction data: transaction with simplified· VAT-exempt · closed traders
2. Suspicious sum table of TIs (wrongfully deducted input tax)
- wrongful transaction data: transaction with simplified· VAT-exempt · closed traders
▣ Computerize tax filing, examine sum table of TIs (between purchasers and suppliers)▣ Computerize tax filing, examine sum table of TIs (between purchasers and suppliers)
Type of data : Mis-matching tax invoices, Suspicious sum table of TIs(different from real
trade)
Type of data : Mis-matching tax invoices, Suspicious sum table of TIs(different from real
trade)
4. Filing & Audit Mgt.
▣ Compliant filing is a key to expose tax base (transformed into fully self-assessment filing system)▣ Compliant filing is a key to expose tax base (transformed into fully self-assessment filing system)
▣ Inducing compliant filing▣ Inducing compliant filing
Provide individual & customized guidance to taxpayers
Follow-up inspection and auditing to insincere taxpayers
Offering convenience of filing (e-filing service, etc)
Provide individual & customized guidance to taxpayers
Follow-up inspection and auditing to insincere taxpayers
Offering convenience of filing (e-filing service, etc)▣ Filing Management Model ▣ Filing Management Model Filing guidance beforehand → Follow-up inspection after
filing → Correction of filing → Adjustment & auditing Enhancing connection between filing and auditing
Filing guidance beforehand → Follow-up inspection after filing → Correction of filing → Adjustment & auditing
Enhancing connection between filing and auditing
Store
CRSONTS
Purchase in cash1
Issues Cash Receipt4
Send sales data(daily batch)
5
Inform receipt of data6
Transmit sales data (real time)
2
ApproveIssuance
3
Build DB
7
Register as member8Check cash purchase history
9
Checks cash revenue9
Customer
CRS: Cash Receipt SystemCRSO : Cash Receipt System Operator
5-1. Cash Receipt System - Relationship Chart
31B USD31B USD
61B USD61B USD
’06 ’07 ’08
0.74B0.74B
2.89B2.89B
’06 ’07 ’08
※ Measured as percentage of credit card/Cash Receipt usage in consumer spending
52.2%52.2%
65.0%65.0%
’06 ’07 ’08
1.49B1.49B
58.5%58.5%50B USD50B USD
5-2. Cash Receipt System - Results
Successful results of the Cash Receipt SystemSuccessful results of the Cash Receipt System
46.6%46.6%
’05
V V Lowering Compliance cost : Hometax Lowering Compliance cost : Hometax Lowering Compliance cost : Hometax Lowering Compliance cost : Hometax
Comprehensive on-line tax-related service (www.hometax.go.kr)
At home or office over the Internet without visiting tax office!
(1) e-tax filing & payment
(2) e-issuance of tax-related certificates
(3) Filing record and Tax calculator
1. What is Hometax?
45.3%
55.7%59.2%
59.8%
29.1%
200
400
600
800
Jan 04 Jan 05 Jan 06 Jan 07 Jan 08
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
Registered users (10K people)
Registration rate(Registered business/Total business)
Dec 08
100066.8%
2. Registered Users
171
294
414
505
610
981
About 70% of tax-related certificates issued online a month on average : equivalent to 8M annual tax office visits
Most of tax filing has been done electronically (2008)
3. Key Statistics
Usage on a Steady IncreaseUsage on a Steady Increase
'04 '05 '06 '07 '08
VAT Income tax Corporate tax Withholding tax
4. Benefits of Hometax
BenefitsBenefits
Cost-effectiveness : cost cut by about 442M USD annually
- Local tax offices : 126M USD a year (in printing and postal service)
- Taxpayers : 316M USD (in transportation and labor)
Improved date accuracy
Administrative transparency
VI VI Policy Implications Policy Implications Policy Implications Policy Implications
Both internal & external conditions need to be improved
in a balanced way for modernizing tax admin.
Tax Resource Management Approach
- Earlier days : dependent on Administrative power
- Nowadays : Systematic Approach & Building Tax Infrastructure
Values in Tax Administration
- Efficiency, Specialization & Transparency, Fair procedure, Taxpayer’s rights improvement
Policy Implications
Thank you!