제목 없음〈 Opening 〉
Mr. Peter Thewlis, Vice-President of the EUCCK,
His Excellency Dorian Prince of the EU delegation,
EUCCK members, and ladies and gentlemen!
Thank you for inviting me to this meaningful luncheon meeting. I would also
like to take this opportunity to express deep appreciation to the EUCCK members
for your faithful tax compliance and contribution to the development of the
Korean economy.
It is also a pleasure for me to be given this valuable chance to share my
thoughts on our tax administration. I hope that today\'s meeting can serve as
an opportunity to raise mutual understanding between you and the NTS.
Prior to my speech, I would like to introduce to you the members of the senior
officials working in the international tax field.
From the Headquaters of NTS,
Mr. Tae-eon Jeong, Assistant Commissioner for International Taxation
Mr. Seong-tae Kang, Director of the International Cooperation Division
Mr. Gyung-soo Chae, Director of the International Tax Resource Management
Division
Mr. Seung-jae Lee, Director of the International Investigation Division
And from the Seoul Regional Tax Office,
Mr. Chul-gun Hong, Assistant Commissioner for International Transactions
Management Bureau.
In my talk today, I will explain the overall reform of tax administration,
which I have been implementing since I took office March last year. This includes
the achievements up to date and the future plans, focusing on the NTS current
policies towards foreign companies.
〈 Tax Administration Reform 〉
In today\'s world, tax competition between states is becoming more fierce
due to the new communication system of information & knowledge, and the
free flow of people, resources, and capital.
Under these circumstances, the Korean government has been striving to create
a better investment environment by reducing individual or corporate income tax
rates and by making it more convenient for taxpayers to deal with tax affairs.
In line with this policy direction, my aim is to provide a business-friendly
tax climate without discrimination between domestic and foreign companies with
the ultimate goal of making a trustworthy National Tax Service through fair
taxation and transparent tax administration.
To earn the trust of the taxpayers, this is the context in which I started
to implement the tax administration reform. I would like to touch upon a five-part
approach to tax administration reform which NTS has been promoting so far.
Firstly, we are providing various tailored taxpayer services, eliminating
taxpayers\' needs to visit tax offices or meet tax officials, and hence allowing
taxpayers to focus on their day-to-day businesses.
To begin with, we have built up the「Home Tax Service」, which allows taxpayers
to deal with their tax matters, for filing, payment or certificate issuance,
over the Internet in their office or at home. I would like to recommend that
you enjoy the benefits of e-filing. Taxpayers not familiar with the Internet
may fully utilize return-filing by mail and receive tax information through
mobile phone text messaging.
The「National Tax Consultation Center」quickly handles nationwide tax inquiries
raised through telephone, fax, mail and e-mail on a one-stop service basis.
Also we are forwarding the NTS Weekly Newsletter full of useful tax information
via e-mail to over 1.3 million taxpayers.
Especially, we are introducing various taxpayer services to better cater
the needs of foreign taxpayers, so that foreign investors may easily adapt to
the business environment in Korea.
A variety of tax information guides are being published and distributed to
help foreign investors use the tax incentives and file tax returns.
Also, we have been operating the NTS English web site to provide useful tax
information to foreign taxpayers. The「Taxpayer Help」section features 3 categories,
which are「Q&A」,「FAQ」and「Foreign Taxpayer Advocate Service」, where
our tax experts help foreign taxpayers with their problems and questions.
Furthermore, we are endeavoring to hold regular meetings with foreign business
communities in Korea as well as occasional gatherings such as the「NTS Open
House」in March this year, to hear concerns and suggestions.
In particular, there is a plan to arrange working level meetings between
the tax experts from foreign businesses and the NTS for the development of taxation
standards in coming July and October.
In addition, Help-lines in English are being operated to handle inquires
from foreigners in the headquarters and Seoul Regional Tax Office.
The「International Tax Advocate Service」in Seoul Regional Tax Office has
also been initiated to serve as a channel of communication and recommendation
between NTS and foreign businesses.
Secondly, we have been completely reforming the tax audit system so that
honest taxpayers are protected whereas tax evaders are strictly treated.
First of all, we have been enhancing transparency of the tax audit system
and relieving taxpayers\' anxieties on audits through the advance publication
of audit policy and candidate selection criteria for tax audits.
For this, the「2004 Tax Audit Policy Directions」for domestic and foreign
companies will be announced around the middle of this month.
The basic principle of the Directions is to reduce the ratio of taxpayers
selected for tax audit and to heighten audit intensity on those chosen. And,
the candidates for tax audit are mainly selected among those with high levels
of tax evasion through objective and scientific criteria by computer.
Here, I would like to note that such tax audit policies mentioned above are
equally applied to both foreign and domestic companies.
Meanwhile, we have separated the management unit from the investigation unit
within the tax audit system to set up a system of checks and balances.
The「Tax Audit Service Center」, the management unit, ensures the entire
audit procedure to be carried out in a fair and transparent manner and hence
guarantees the protection of the rights and interests of taxpayers. We have
dedicated duty officers at the Center to deal with any problems of foreign taxpayers
during a tax audit.
The Center will be firmly established to assure its proper functions, in
particular allowing disputable matters addressed in the「Tax Disputes Committee」for
a full consideration of a taxpayer\'s position.
The Seoul Regional Tax Office, which covers around 70% of the foreign companies
in Korea, has the「International Tax Disputes Committee」for foreign companies,
apart from「Tax Disputes Committee」. The Committee is expected to raise consistency
and adequacy of tax assessments on cross-border transactions.
We\'ve also initiated the「Tax Administration Real Name System」for the prevention
of false assessments and the protection of taxpayers\' rights
Under this system, all tax administration processes such as assessments,
appeals and collections are accumulatively computerized in the name of the officer
in charge of each process.
And, each officer is regularly evaluated on the performance review conducted
through this system.
Moreover, we\'ll relieve compliant taxpayers from their uneasiness by resolving
ambiguity promptly and spot tax evaders at an early stage by monitoring tax
returns through the「Prompt Review System」so that an audit will take place
not too long after the filing of returns.
With the set up of this system, an audit on a taxpayer would be conducted
within 2 years from the date the return is filed, which is currently 3～5 years.
In particular, we\'re running the tax audit system in a more flexible way
to foreign companies in Korea. For instance, where a foreign company selected
for a tax audit is estimated as relatively honest, the tax audit will be conducted
in the tax office rather than the company\'s office in order to reduce the company\'s
audit burden.
In addition, we will try to minimize the period for field audits and the
amount of documents to be submitted. Foreign companies will be given sufficient
time to submit offshore documents requested for an audit.
In case the result of a tax audit reveals high level of compliance, the concerned
taxpayer will be designated as an Exemplary Taxpayer and will be rewarded with
various benefits.
The Exemplary Taxpayer System will be explained further in the latter part
of this speech.
Especially, we are improving the transfer pricing audit system in a way to
ease audit burdens on foreign companies. The transfer pricing audit has been
a highly controversial matter between the competent authorities and foreign
companies.
First of all, a tax audit for transfer pricing only will not be conducted
unless there is a clear indication of tax evasion. Instead, a transfer pricing
audit will be incorporated into the course of normal tax audits, along with
the number of business years subject to an audit on transfer pricing issues
being reduced from 5 to 3 in principle.
Furthermore, before a tax assessment by a district or regional tax office
on transfer pricing audit is finalized, the headquarters of the NTS will review
its validity in advance to prevent unreasonable and arbitrary tax assessment.
On the other hand, we are minimizing the disputes pertaining to the Transfer
Pricing issue through active application of Advance Pricing Arrangement (APA).
Thirdly, we\'re in the process of spreading tax compliance culture where taxpayers
are more willing to pay their fair share, by acknowledging honest taxpayers
and raising citizens\' awareness of the immoral and criminal aspects of tax evasion.
For this, up to now a total of 51 Exemplary Taxpayers who exhibited high-degree
of integrity has been designated through diversified processes such as audit,
self-application and third party recommendation.
Those taxpayers are rewarded with various benefits such as a 3-year exemption
from tax audit and VIP client status at financial institutions.
This year, more Exemplary Taxpayers will be identified and increased benefits
are under consideration. The Exemplary Taxpayer system equally applies to both
domestic and foreign companies. 4 out of 51 Exemplary Taxpayers up to now are
foreign invested companies, not so much so far, but we plan to actively identify
foreign companies that show high degree of tax compliance.
I look forward to seeing many of the foreign companies here enjoy the benefits
of honest tax payments.
Moreover, we are trying to instill the sense of worthiness and pride in taxpayers
by awarding the upper-bracket corporate taxpayers with the \'Commemorative Trophies\'
and \'Tax Points\' for individual taxpayers that are reflective of the amounts
of tax paid.
On the other hand, those who intentionally and fraudulently evade taxes shall
be subject to criminal tax investigation and be strictly penalized. This is
to spread the idea that compliant return filing from the beginning is in one\'s
favor.
In addition, we\'re strengthening the Civic Watch System to encourage a more
compliant tax payment culture. In relation to this, the candidates in last April\'s
parliamentary elections were required to disclose their personal and family\'s
tax records of the past five years according to revised election laws.
And, the names of top delinquent taxpayers with the accounts of over one
thousand million won that have been in arrears for more than 2 years will be
publicly disclosed this September for the first time in the NTS history.
Fourthly, we aim to prevent corruption by making tax administration more
transparent and trustworthy. Various systems are in operation in order
to prevent lobbying or bribery.
I assure you that under-the-table contacts will be prohibited by operating
the tax investigation unit in a confidential manner, and that any lobbying for
obvious tax evasion through personal connections or unofficial channels will
no longer be accepted. Anyone who offers bribes, either a taxpayer or a tax
agent, is subject to intensive tax investigation.
At the same time, we are taking several measures to establish an organization
culture that values honor and innovation, giving hopes and dreams to the NTS
members.
In a word, incentives in terms of personnel rating and remuneration are rewarded,
on the basis of ability and performance review, not on personal connections.
Finally, we are raising the consistency and predictability of taxation by
clarifying our taxation rulings to suit global standards.
To this end, we are in the process of revising those rulings in the international
taxation field that have been cumbersome to taxpayers, controversial and are
related to new types of cross-border transactions, based on global standards
such as the OECD Model Tax Convention Commentaries.
For example, tax laws and rulings on issues such as \'permanent establishment\',
\'personal service and royalty payment\', \'remuneration for intragroup service\'
and \'securities lending transactions\' and so on are currently being revised.
Besides, the Basic Tax Ruling on the application of the「Law of Coordination
of International Tax Affairs(LCITA)」will be enacted and put into effect in
coming July.
And, court cases related with international taxation are going to be categorized
and disclosed on the NTS website for the convenience of foreign taxpayers.
Also, new regulations on corporate entertainment expenses have been put into
effect from January 1, 2004 in order to meet the global standards and to strengthen
transparency in business activities.
Moreover, we seek to educate our tax investigators so that they are fully
armed with the knowledge of all the relevant tax laws and regulations, to prevent
unreasonable taxation. If necessary, we will invite EUCCK members to speak at
the NTS tax officials\' training sessions.
So far I have given you an overview of the tax administration reform centering
on the NTS policies for foreign companies and investors.
As mentioned above, through intensive promotion of tax administration reform,
various improvements have been made in terms of systems and infrastructure.
As a result, we have earned outstanding evaluation from the other government
agencies and the public. However, I am afraid the reality may be that taxpayers
are not fully aware of the changes yet.
Therefore, all 17,000 NTS members are endeavoring to put the reform into
practice to enable the taxpayers to actually feel the changes.
〈 Closing 〉
Members of the EUCCK !
I hope today\'s meeting can create a momentum to further expand trade and
investment between the EU and Korea.
In this point, I believe EUCCK will take a more important role as a friend
and partner of Korea and the NTS.
We at the NTS will continuously strive to reform and develop tax administration
in the direction of enhancing foreign taxpayers\' convenience and creating a
favorable tax climate for foreign investors.
We will always be there whenever you need our service, with the mission of
Fair Taxation, Transparent Tax Administration and Trustworthy National Tax Service.
I wish you continued success in your business in Korea. As your business
develop so will the Korean economy.
Thank you very much.
