제목 없음President of the AMCHAM Korea, William Oberlin,
Distinguished Members,
Ladies and Gentlemen!
It is my honor to speak at the AMCHAM Membership Meeting
today. I would also like to thank everyone who has arranged this event and given
me this chance to share the new initiatives and the way forward for our tax
administration.
I hope that today’s meeting can serve as an opportunity
to raise mutual understanding between foreign investors and the NTS.
My speech has two main parts. Firstly, I will explain the
tax administration reform which I have been implementing since I took office
last March. This part applies to both domestic and foreign companies. Then I
will introduce the NTS policies which apply only to foreign companies.
〈 Tax Administration Reform 〉
Now I would like to present an overview of the tax administration
reform.
In the 21st century we live in, the free flow of resources
and capital across borders requires corresponding changes to tax policies in
each country.
International competition has been intensifying as every
country in the world strives to create a better investment environment, mainly
by competitively reducing individual and corporate income tax rates and by making
it more convenient for taxpayers to deal with tax affairs.
In order for Korea to become the business hub of Northeast
Asia, favorable tax rates compared to other countries and a reform of tax administration
are required.
On the other hand, domestically we face increasing fiscal
demands for promotion of welfare and expansion of SOC to reach a per capita
income of $20,000.
Overcoming these challenges requires the Korean government
to achieve contradictory goals: reducing tax rates and at the same time, increasing
tax revenue.
This is the context in which I started to implement overall
reform of the tax administration. My aim is to earn the trust of domestic and
foreign taxpayers through fair taxation and transparent tax administration.
I believe that only a trustworthy tax administration can
inspire taxpayers to make honest payments rather than try to evade taxes.
Next I would like to mention a four-part approach to earn
the trust of the taxpayers.
Firstly, we are endeavoring to provide a world-class taxpayer
service, allowing taxpayers to concentrate on day-to-day business by alleviating
the need to visit tax offices or meet tax officials.
For this we are providing various services, including IT
solutions such as the Home Tax Service, which allows all tax matters to be dealt
with over the Internet.
Also we are publishing the NTS Weekly Newsletter full of
useful tax information, which is written in Korean and available via e-mail.
Anyone can subscribe to the newsletter by clicking on the banner of the NTS
home page.
The National Tax Consultation Center is another taxpayer
service, which helps alleviate the need to visit tax offices. The expert staff
of the Center quickly resolves nationwide tax inquiries raised through telephone,
fax, mail and e-mail on a one-stop service basis.
Also, the Taxpayer\'s Advocate at each district tax office
will fully represent taxpayers’ interests and actively help them resolve unfair
situations.
In addition, by enhancing the roles and responsibilities
of taxpayers’ representatives, we are making it easier for business owners
to leave tax matters to taxpayers’ representatives and focus on their own businesses.
Secondly, we are completely reforming the tax audit system
in order to protect honest taxpayers and to prevent tax evasion.
First of all, we have been enhancing the transparency and
predictability of the selection process of subjects for the tax audit using
a computerized method. This computer analysis method will be continuously improved
to prevent honest taxpayers from being selected and tax evaders from being excluded.
In addition, the ratio of subjects for the tax audit to
the taxpayer population will be reduced. The subjects for the tax audit will
mainly include taxpayers whose returns are evaluated as inaccurate or dishonest
through the computer analysis. Once they are selected, an intensive audit will
be conducted in compliance with the tax laws.
Also, the tax audit policy and the selection criteria are
announced in advance in order to increase transparency of the tax audit system
and to relieve taxpayers’ anxieties. The first announcement was made on July
1 this year. For the year of 2004, the announcement will be made early next
year.
Furthermore, we have separated the service unit from the
investigation unit within the tax audit system to set up a system of checks
and balances. The Tax Audit Service Center, a service unit within the tax audit
system, has been set up at both Seoul and Jungbu Regional Tax Offices. The Center
will protect taxpayers\' rights during the audit process and minimize arbitrary
tax assessments by tax inspectors.
For foreign taxpayers, the NTS appointed specially trained
staff at the Tax Audit Service Center. Foreign taxpayers are encouraged to consult
the Center, as the staff will deal with any problems of foreign taxpayers during
a tax audit in a fair and transparent manner.
We have abolished the Special Tax Investigation that was
a major source of taxpayer complaints. Instead taxpayers are classified and
treated differently according to their level of tax compliance.
In this way honest taxpayers receive preferential treatment,
while those who commit minor offences are normally audited, and those who deliberately
evade taxes are subject to criminal tax investigation and strict punishment.
Next year, we will introduce the Real Name Taxation System
to reinforce internal regulations so that unreasonable and arbitrary tax assessment
cannot occur. Tax collection records of each audit will be accumulated and analyzed
according to the tax inspector’s name.
Thirdly, we aim to prevent and eliminate 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 any lobbying for obvious tax evasion,
through personal connections or unofficial channels will no longer be accepted.
Anyone who offers bribery is subject to intensive tax investigation.
Finally, our aim is to establish a tax culture where taxes
are willingly paid. This will be achieved by acknowledging honest taxpayers
and expanding citizens\' awareness of the immoral and criminal aspects of tax
evasion.
To acknowledge honest taxpayers, the Exemplary Taxpayers
Award was introduced. The Exemplary Taxpayers are designated through a rigorous
screening process among those candidates nominated by the audit bureau, the
citizens or the taxpayers themselves.
Once selected as Exemplary Taxpayers, they will receive
preferential treatment through various benefits such as a 3-year exemption from
tax audit, and VIP client status at financial institutions. For the first time
in NTS history, 12 taxpayers were awarded as Exemplary Taxpayers last October.
I look forward to seeing all of the foreign companies here enjoying the benefits
of honest tax payments.
In addition, the Tax Point System will be introduced to
give taxpayers various benefits relative to the amount of tax that they have
paid. Trophies will be awarded to taxpayers who have paid a remarkably high
amount of taxes for their contribution to national fiscal revenue.
On the other hand, if there is an obvious case of tax evasion
through fictitious transactions, profit manipulation, transfer pricing, treaty
shopping, or tax haven, the case shall be subject to intensive tax investigation
by a strict application of the law.
I believe that the awards given to honest taxpayers coupled
with the severe punishments facing tax evaders will establish a tax culture
in which taxes are willingly paid.
〈NTS Policies for Foreign Companies〉
So far, I have explained the tax administration reform
that applies equally to both domestic and foreign companies. Now I would like
to introduce additional NTS policies applicable to foreign companies and investors.
In order for Korea to become the economic hub of
Northeast Asia and to reach a per capita income of $20,000, it is vital to attract
foreign capital.
In an effort to attract this much-needed capital, the Korean
government is implementing various policies to create an environment favorable
to foreign investors.
The NTS also makes an effort to run its tax administration
in a consistent and predictable way, allowing foreign investors to concentrate
on their businesses without unnecessary concern about tax affairs.
Now let me explain in brief what the NTS is doing for the
benefit of foreign companies.
Firstly, we are endeavoring to provide various taxpayer
services and a variety of tax support systems so that foreign investors may
easily adapt to the business environment in Korea.
As you might already know, compared to other competing
countries, the Korean government provides a wide range of tax incentives for
foreign investors. The NTS actively supports foreign taxpayers to fully utilize
these incentives.
The NTS is publishing tax information guides for distribution
to help foreign investors use the tax incentives and file tax returns.
Also, the NTS has been operating the NTS English web site
to provide useful tax information to foreign taxpayers. This site was fully
revised on November 3 this year.
Currently, the web site contains a useful collection of
tax laws, taxpayer information, and tax administration trends. There is also
a Q&A section where our experts answer taxpayer queries. The most common
questions are added to the FAQ page.
The Foreign Taxpayer’s Advocate Service section will be
added soon. This section is designed to offer advice on tax problems to foreign
taxpayers and to allow them to make suggestions regarding the tax administration
of Korea. We will continuously improve the web site to meet foreign taxpayers’
needs.
Furthermore, we are going to hold more meetings with foreign
business communities such as AMCHAM. Through such regular meetings, we will
collect comments and ensure that the NTS accommodates foreign taxpayers’ needs.
In particular, before deciding on a ruling which may impact
an industry, we will have industry forums to listen to comments from people
who will be affected by it. A detailed plan for the meetings will be designed
after listening to the opinions of foreign business communities.
Secondly, the NTS will increase the predictability of tax
audits by making the tax audit system fairer and more transparent in which there
will be no discrimination between domestic and foreign companies.
As I mentioned at the first part of the speech, the same
reforming measures such as the transparency and predictability of the audit
selection process, the reduction of the ratio of subjects for the tax audit
and the advance announcement of the selection criteria are all equally applied
to foreign companies and domestic companies.
Also we will run the tax audit system in a more reasonable
way to support foreign companies in Korea as follows.
Where a foreign company selected as the subject for a tax
audit is assessed as relatively honest, the tax audit will be executed within
the tax office rather than the company’s office in order to reduce the company’s
burden.
In addition we will try to minimize the period for field
audits and the amount of documents submitted to tax inspectors. Foreign companies
will be given sufficient time to submit offshore documents requested for an
audit.
As I mentioned already, if the result of a tax audit shows
that the taxpayer is honest, the taxpayer will be designated as an Exemplary
Taxpayer and will receive various benefits.
Thirdly, we will improve the transfer pricing audit system
to reduce the inconveniences faced by foreign investors and conflicts between
foreign taxpayers and the tax authorities.
First of all, a tax audit only for transfer pricing will
not be executed unless there is clear indication of tax evasion using transfer
pricing manipulation. Instead a transfer pricing audit will be incorporated
into the course of normal tax audits.
We will reduce the audit period from 5 to 3 business years
under the condition that there is no clear indication of tax evasion. Accordingly,
taxpayers’ burden resulting from transfer pricing audits will be greatly relieved.
In addition, before a tax assessment on transfer pricing
is finalized, the head office of the NTS will review its validity in advance
to prevent unreasonable and arbitrary tax assessment.
We recommend using APA, Advanced Pricing Agreement, to
prevent transfer pricing related conflicts.
Finally, to ensure the certainty of tax administration,
we are raising the consistency and predictability of taxation by clarifying
the international taxation criteria to suit the global standards.
For this, we are revising the laws and rulings on the international
taxation field, which have been the source of some controversy, to conform to
the global standards such as the OECD Model Tax Convention Commentaries.
For example, tax laws and rulings including such issues
as permanent establishment, personal service and royalty payment are currently
being revised.
We are planning to establish basic rulings related to the
Law of Coordination of International Tax Affairs (LCITA) and to put them into
effect from next year.
Also, existing rulings and court cases related with international
taxation are going to be separately classified and disclosed on the homepage
for the convenience of foreign taxpayers.
Moreover, we will strengthen the training of our tax auditors
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
AMCHAM members to speak at the training sessions.
In a word, the Korean tax administration will be continuously
reformed in the direction of enhancing foreign taxpayers’ convenience and creating
a better environment for foreign investors.
So far I have given you an overview of the tax administration
reform and the NTS policies for foreign companies and investors.
I will continuously strive to reform and develop the tax
administration of Korea so as to make the NTS more trustworthy and business-friendly
for foreign investors.
My goal will be easier to achieve with your help. I ask
for your continued interest and cooperation by sharing your thoughts with me.
As your businesses develop, so will the Korean economy.
I hope that your businesses prosper in Korea.
Thank you very much for listening.
