e-Tax Administration in South Korea and Its Achievements...44 Before Service After •A number of...

Copyrightⓒ. Saebyeol Yu. All Rights Reserved.

e-Tax Administration in South Korea and Its Achievements

Jae-Jin KimVice PresidentKorea Institute of Public Finance

1


Table of Contents

Ⅰ. Overview of Korean Tax System

Ⅱ. Tax Administration Reform

Ⅲ. e-Tax Administration in Korea

Ⅳ. Its Achievements

2


Ⅰ. Overview of Korean Tax System

3


E c o n o m i c D e v e l o p m e n t o f K o r e a1

A . G r o w t h R a t e

v Korea has been growing rapidly since 1954 despite three economic crisis

4-10

-5

0

5

10

15

20

Korea’s GDP Growth (1954-2018)

GlobalFinancial

Crisis

Oil Shock

IMFbailout

(Unit: %)

The highest 14.8% (1973)


E c o n o m i c D e v e l o p m e n t o f K o r e a1

GDP

v GDP in 2018 amounts to1,619 billion USD, whichincreased more than 1,200times from 1953§ Ranked 12th in the world

v In 2018, Korea’ GNI percapita surpasses 30,000USD for the first time, whichis 467 times greater than the1953 figure and also anindicator of an advancedeconomy§ Ranked 32nd in the world

B . G D P a n d G N I p e r C a p i t a

$1.3 billion

$1,619 billion

x 1,246

1953 2018

$67

$31,349

x 467

1953 20185

GNI per Capita


T a x R e v e n u e o f K o r e a2

v Korea’s economy shifted from aid dependence to fiscal self-reliance§ After the peak in 1957 (52.9%),

foreign aid and fund in government revenue decreased to reach 4% in 1970

v In addition to economic development, establishment of National Tax Service (NTS) in 1966 facilitated domestic revenue collection

A . D o m e s t i c R e v e n u e M o b i l i z a t i o n

Tax to Government Revenue (1953-1970)

6

(Unit: %)

75%

3.9%

0

10

20

30

40

50

60

70

80

90

1953 1954 1955 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968 1969 1970

Tax/Government revenue Foreign aid & Counterpart fund/Government revenue

Establishment of NTS (1966)



v Tax revenue increased from 2.7 billion KRW (1953) to 0.4 trillion KRW to 345.8 trillion KRW (2017)v It increased more than 800 times

between 1970 and 2017

v Tax revenue has increased rapidly since 1980s, thanks to the adoption of social security system§ National Health Insurance

Service (1972)§ National Pension Service (1988)

B . Ta x R e v e n u e

Tax Revenue (1970-2017)(Unit: Trillion KRW)

0

50

100

150

200

250

300

350

400

345.8(2017)

7

x 864

0.4(1970)



v Tax revenue as % of GDP (incl.social contribution) increased by 14.5%p from 1972 to 2017, reaching 26.9%

v Tax revenue as % of GDP (excl. social contribution) increased by 14.7%p from 1953 to 2017, reaching 20%§ Social security system began

to be introduced in the 1970s

C . Ta x - t o - G D P R a t i o

8

Tax-to-GDP (1953-2017)

20%

26.9 %

0

5

10

15

20

25

30

1953

1955

1957

1959

1961

1963

1965

1967

1969

1971

1973

1975

1977

1979

1981

1983

1985

1987

1989

1991

1993

1995

1997

1999

2001

2003

2005

2007

2009

2011

2013

2015

2017Tax-to-GDP (excl. social contribution) Tax-to-GDP (incl. social contribution)

+14.7%p

+14.5%pNational Pension Service

National Health Insurance

Service

Note: 1956 data is unavailable


26 % 28 % 30 % 30 % 30 %

24 % 22 % 22 %23 % 23 %

30 % 30 % 26 %27 %

27 %

0

50

100

150

200

250

300

2013 2014 2015 2016 2017

Internal Tax Revenue by Tax Categories

Special Tax for Rural DevelopmentEducation TaxTransportation · Energy ·Environment TaxSecurities Transaction TaxStamp TaxLiquor TaxIndividual Excise TaxValue Added TaxComprehensive Real Estate Holding TaxGift TaxInheritance TaxCorporate Income TaxPersonal Income Tax


D . I n t e r n a l Ta x R e v e n u e

v PIT, CIT and VAT are main sources of revenue

(Unit: Trillion KRW)

9


79% 78% 78% 79% 79% 79% 77% 75% 76% 77%

21% 22%22%

21% 21% 21% 23%25%

24%23%

0

50

100

150

200

250

300

350

400

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Share of National Tax and Local Tax (2008-2017)

National Tax Local Tax


E . S h a r e o f N a t i o n a l / L o c a l Ta x

v National Tax accounts for 77%, while Local Tax makes up 23%(Unit: Trillion KRW, %)

10


T a x I n s t i t u t i o n s o f K o r e a3

A . Ta x A g e n c i e s

Central Government

Local Government

Prime Minister (PM)

Ministry of Economy and

FinancePM’s Office

Ministry of the Interior and Safety

National Tax Service

(NTS, 1966)

Korea Customs Service

(KCS, 1970)Tax Tribunal Local

Government

11


T a x I n s t i t u t i o n s o f K o r e a3

B . Ta x S t r u c t u r e

National Taxes(14)

Taxes(25)

Local Taxes(11)

Customs Duties

City/County Tax

Internal Taxes

• Local Income Tax• Inhabitant Tax• Property Tax• Automobile Tax• Tobacco Consumption Tax

Provincial Taxes

• Tax for Local Resource Facilities• Local Education Tax

• Acquisition Tax• Registration and License Tax• Local Consumption Tax• Leisure Tax

• Transportation, Energy and Environment Tax• Education Tax• Special Tax for Rural Development

• Personal Income Tax• Corporation Tax• Inheritance Tax• Gift Tax• Comprehensive Real Estate Holding Tax• Value Added Tax• Individual Consumption Tax• Liquor Tax• Stamp Tax• Securities Transaction Tax

Earmarked Taxes

Ordinary Taxes

Ordinary Taxes

Earmarked Taxes

Ordinary Taxes

12


B e s t P r a c t i c e o f K o r e a4

v Korea is a world leader in e-government§ Ranked top in E-Government Development Index (EGDI) from 2010-2014§ Ranked top in E-Participation Index (EPI) in 2010-2014 and in 2017

A . W o r l d - C l a s s E - g o v e r n m e n t

E-Participation Index

Note: Rank out of 193 countries, index in brackets has value up to 1.000Source: UN (2018)

E-Government Development Index

13

13(0.7441)

5(0.8575)

5(0.8727) 6

(0.8317)

1(0.8785)

1(0.9283)

1(0.9462)

3(0.8915)

3(0.9010)

2003 2004 2005 2008 2010 2012 2014 2016 2018

Note: Rank out of 193 countries, index in brackets has value up to 1.000Source: UN (2018)

16(0.4828)

6(0.7705)

4(0.8730)

2(0.9773)

1(1,.000)

1(1.000)

1(1.000)

4(0.9661)

1(1.000)

2003 2004 2005 2008 2010 2012 2014 2016 2018



B . N o . 1 I C T P e n e t r a t i o n

14

v Korea leads the ICT adoption pillar in the World Economic Forum§ No.1 on fiber internet subscriptions§ No.6 on broadband internet subscriptions§ No.9 on the percentage of internet users to the overall population

(World Economic Forum, 2018)

v Korea has the highest smartphone ownership rate in the world§ No.1 on mobile phone penetration and smartphone ownership§ 100% of adults report owing mobile phones, while 95% of them report owing a smartphone

(Pew Research, 2018)



C . N o . 1 I C T Q u a l i t y

15

v Korea tops in average connection speed on the Internetv 28.6 Mbps in the 1st quarter of 2017, while the world average marks only 7.2 Mbps

v Korea tops in LTE network speed§ LTE average download speed 150.68 Mbps, LTE average upload speed 43.93 Mbps

Source: Akamai (2017)

LTE Average Download Speeds

28.6

21.9

20.3

20.2

16.9

16

14.7

11.1

9.5

8.9

South Korea

Hongkong

Singapore

Japan

Taiwan

Thailand

New Zealand

Australia

Vietnam

Malaysia

Average Connection Speeds of the Internet

150.68

74.17

55.58

42.01

27.15

South Korea

Toronto

Frankfurt

Paris

Hongkong

Source: The Ministry of Science and ICT of Korea (2018), Korea Telecommunications Operations Association(2018)

(Unit: Mbps) (Unit: Mbps)


Ⅱ. Tax Administration Reform

16


B a c k g r o u n d o f T a x A d m i n i s t r a t i o n R e f o r m1

A . O p e r a t i n g C o s t s

Costs incurred by taxpayers, or third parties such as businesses in complying with their tax obligations

O p e r a t i n g C o s t s

C o m p l i a n c e C o s t s

Costs incurred by (mainly) public sector agents in order to collect the taxes, and to manage and administrate tax system

• Costs of labour/time consumed in completion of tax activities

• Costs of expertise purchased to assist with completion of tax activities

• Incidental expenses incurred in completion of tax activities

• Psychological costs and social costs

• Costs of running of the revenue departments, including salaries of staff, pensions and office expenses

• Legislative costs: drafting and legislating the tax law, designing and planning the tax policy

• Juridical costs: interpreting and implementing the tax law; resolving disputes

17

A d m i n i s t r a t i v e C o s t s



B . O b j e c t i v e s o f R e f o r m

Efficiency

Convenience

Adam Smith’s Four Main Canons of Taxation

Equity

Certainty

Convenience

Economy

“A good tax system is designed on the basis of an appropriate set of principles.”

“The system should strike a balance between the interests of the taxpayer and the tax authorities.”

『Wealth of Nations (1776)』

To improve vertical and horizontal equity of tax system

To make tax system predictable and objective

To provide service without time and spatial constraints

To establish less-costly and more efficient tax service

18



C . B a c k g r o u n d f o r e - Ta x R e f o r m

② Need for effective tax management

- Necessity of managing exploding taxpayer data- Need to broaden tax base and increase tax revenue

④ Alignment with e-government strategies

- Synergies created among government bodies byinformation sharing

- Demands for transparent and fair tax system- Demands for efficient and customer-friendly service

① Taxpayers’ demands for better tax service

- High prevalence of computer and the Internet- Increasing IT-literate manpower③Matured IT environment

19


I n t r o d u c t i o n o f e - T a x S y s t e m i n K o r e a2

A . B r i e f H i s t o r y o f e - Ta x S y s t e m

v Initial Stage of e-Tax administration: 1967-1996FROM manual work TO computerization§ Simple computerization of tax data without sophisticated management of them§ Establishment of computers, recruitment of computer-literate personnel, improvement of computer

technology, strengthening of employee capacity, data accumulation and processingv Launch of Tax Integrated System (TIS): 1997

Effective beginning of e-tax system

20


Ⅲ. e-Tax Administration in Korea

21


H i s t o r y o f e - T a x A d m i n i s t r a t i o n1

A . H i s t o r y o f e - Ta x A d m i n i s t r a t i o n

2015

NeoTax

IntegratedSystem(NTIS)

2015

NeoTax


1997

TaxIntegrated

System(TIS)

1997

TaxIntegrated

System(TIS)

2006

SimplifiedYear-end

TaxSettlement

Service

2006

SimplifiedYear-end

TaxSettlement

Service

2003

TaxInformationManagement

System(TIMS)

2003


System(TIMS)

2005

CashReceiptSystem

2005

CashReceiptSystem

2001

HomeTax

Service(HTS)

2001

HomeTax

Service(HTS)

2010

e-taxInvoiceSystem

2010

e-taxInvoiceSystem

1999

IncomeDeduction

ForAmountSpent On

Credit Cards

1999

IncomeDeduction

ForAmountSpent On

Credit Cards

22


T a x I n t e g r a t e d S y s t e m ( T I S , 1 9 9 7 )2

A . O v e r v i e w

1997

TaxIntegrated

System(TIS)

1997

TaxIntegrated

System(TIS)

Definition An integrated database that connects all district tax offices into a single network and allows tax administration by functions

Background Real Name Financial Transaction System (1993) provided massive amount of taxpayers’ financial income data to deal with

Function

① Tax base management : Managemenf of taxpayer information② Tax return filing management : Selection of taxpayers subject to filing and

cross-check of documentation③ Audit management : Selection of non-compliant taxpayers for audit④ Documentation management : Management of various tax-related documentation⑤ Collection management : Notices, collection and asset seizure ⑥ Customer service : Access to certificates and business registration

23


T a x I n t e g r a t e d S y s t e m ( 1 9 9 7 )2

B . E f f e c t

24

① Computerized tax documents and certificates issuance, automatic notification system⇨ Efficient public service

② System integration of all district tax offices, systematic & accumulative management of information⇨ Better management of sources of taxation

③ Automatic analysis and research process, exclusion of redundant investigation ⇨ Objective and transparent tax system

BEFORE AFTERFrom manual administration to automation

①Manually processed tax-related tasks⇨ Inefficient public service

② Use of disaggregated and partial data⇨ Limited analysis on tax base

③ Arbitrary investigation⇨ Lack of transparency


I n c o m e D e d u c t i o n f o r A m o u n t S p e n t o n C r e d i t C a r d s ( 1 9 9 9 )3

Definition An act to allow income deduction for amount spent on credit cards or its equivalent* to incentivize credit card usage and thus to reduce cash transactions

Objective ① To broaden the tax base of self-employed② To identify financial transactions more transparently and strengthen tax equity

Related Acts

1999

IncomeDeduction

For Amount

Spent on Credit Cards

1999

IncomeDeduction

For Amount

Spent on Credit Cards

1999. Enacted 『Income Deduction for Amount Spent on Credit Cards, etc.』2000. Enacted 『Lottery for Credit Card Receipts』2001. Introduced rewards for reporting disguised affiliates2005. Enacted 『Lottery for Cash Receipts』2006. Abolished 『Lottery for Credit Card Receipts』2008. Allowed tax payment by credit card2011. Abolished 『Lottery for Cash Receipts』

25

Note: The term includes amount paid using a credit, debit or prepaid card and amount stated in a cash receipt, according to the Article 126-2 (Income Deduction for Amount Spent on Credit Cards, etc.) of the 「Restriction of Special Taxation Act」

A . O v e r v i e w


I n c o m e D e d u c t i o n f o r A m o u n t S p e n t o n C r e d i t C a r d s ( 1 9 9 9 )3

v Resulted in drastic increase of payment by cardsv In 2017, amount paid by credit or debit card reached 655.7 trillion KRW, expanded 5 times since 2002

Debit Cards Usage (2002-2017)(Unit: Trillion KRW)

Note: Credit card usage excludes short-term cash advance loans

Credit Cards Usage (2002-2017)

26

B . E f f e c t

Note: Statistics for check card usage is only available from 2005

(Unit: Trillion KRW)

0

100

200

300

400

500

600

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Amount Spent on Credit Cards

485.5(2017)

151.8(2002)

0

20

40

60

80

100

120

140

160

180

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Amount Spent on Debit Cards

170.1(2017)

0.08(2002)


H o m e T a x S e r v i c e ( 2 0 0 1 )4

A . O v e r v i e w

Definition An Internet-based integrated tax administration service which enables taxpayers to file tax returns, pay taxes and receive tax-related certificates at home or office

Background

Function

Not just e-filing, but comprehensive tax-related services① Electronic filing of tax returns② Electronic notice of assessment③ Electronic transfer of tax payments ④ Electronic issuance of tax-related certificates⑤ Past filing and payment records⑥ Automatic calculation of tax exemption

2001

HomeTax

Service(HTS)

2001

HomeTax

Service(HTS)

27

To mitigate inconvenience caused by previous tax administration system, which was based on tax payment notices by mail and frequent visits to tax offices


H o m e T a x S e r v i c e ( 2 0 0 1 )4

v Hometax system took root quickly§ The number of subscribers

increased rapidly and reached3.9 million in 2005

§ Registration rate in 2008 was 66.8%,which was 56.9%p higher than in2002

28

Hometax Subscribers

(Unit: 1,000 Persons, %)

605 1,548

2,681

3,921 4,853

5,918

9,809

0%

10%

20%

30%

40%

50%

60%

70%

80%

0

2,000

4,000

6,000

8,000

10,000

12,000

2002 2003 2004 2005 2006 2007 2008

Registered Taxpayers Registration Rate (right axis)

66.8%(2008)

Note: 1) Total Number of Registration includes business taxpayers and non-business taxpayers2) Registration rate = Number of business subscribers/Total number of business taxpayers

B . E f f e c t

9.9%(2002)

+ 56.9%p


H o m e T a x S e r v i c e ( 2 0 0 1 )4

C . D e v e l o p m e n t o f H o m e Ta x S e r v i c e

v My NTS (2010) enabled taxpayers toview their tax-related informationscattered around in one page

v Smartphone-based Hometax (2012)provided following services totaxpayers§ Tax-related certificates issuance§ Capital gains tax/gift tax calculation§ Tax refund history§ Glossary on tax terminology

⇨ Particularly appealed to micro businesses

My NTS

29


T a x I n f o r m a t i o n M a n a g e m e n t S y s t e m ( 2 0 0 3 )5

Definition A decision-making system that provides analysis for audit target selection and tax base management based on accumulated tax data from TIS

Results

① Time-saving for investigationMore than a month ⇨ One day

② Annual budget savings More than 100 million KRW in 2003

③ Real-time statisticsBased on periodic reports from each tax office ⇨ without reports

2003


System(TIMS)

2003


System(TIMS)

30

A . O v e r v i e w


C a s h R e c e i p t S y s t e m ( 2 0 0 5 )6

A . O v e r v i e w

Definition A system that transmits a transaction through the terminals of a cash receipt by entering a, resident registration number, and phone number of a customer

ThreeChannels

① A cash receipt card, issued by the government without cost② Resident registration number③ Cellphone number of a customer

2005

CashReceiptSystem

2005

CashReceiptSystem

Background Even policies to incentivize credit card usage turned out very successful, non-traceable cash transactions still remained

31

Objective To incorporate cash-based transactions into tax system in order to broaden tax base



B . S t r u c t u r e o f C a s h R e c e i p t S y s t e m

1. Purchase by cashCash receipt card, resident registration number,

cell phone number

4. Issue cash receipts

5. Transmit transaction details(once a day)

2. Transmit real-time

transaction details

3. Approve the transaction

6. Provide expenditure history for tax settlement

7. Confirm the cash receipt

Customers Businesses

Cash Receipt OperatorNTS

32



v Resulted in dramatic increase in the number of cash receipts issued and its amount

v In 2017, the number of cash receipt issues reached 4.79 billion cases and the amount of cash receipt issues was 108.6 trillion KRW (5.8 times higher than 2005)

Issuance of Cash Receipts(Unit: Trillion KRW, Million Cases)

0

1,000

2,000

3,000

4,000

5,000

6,000

0

20

40

60

80

100

120

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Amount Case (right axis)33

C . E f f e c t

108.6(2017)

18.5(2005)


S i m p l i f i e d Y e a r - e n d T a x S e t t l e m e n t S e r v i c e ( 2 0 0 6 )7

Definition

Background

Time-consuming, costly and cumbersome year-end tax settlement process

① High compliance costs for employees- For contacting and visiting all the associated institutions personally to get documents for

tax evidence to submit them to withholding agents② High compliance costs for document-issuing institutions

- For managing payment records and issuing receipts③ High administrative costs for withholding agents

- For verifying and storing submitted receipts

2006

SimplifiedYear-end

TaxSettlement

Service

2006

SimplifiedYear-end

TaxSettlement

Service

Service that enables taxpayers to download and print out materials for year-end tax settlement, including receipts from hospitals, schools or financial institutions

34

A . O v e r v i e w



35

Structure of Simplified Year-end Tax Settlement Service

Source: National Tax Service

B . S t r u c t u r e

v A one-stop service for collecting various records(ex. receipts) on the website to claim income deduction and tax credit for wage & salary income§ Launched independently from Home

Tax in December 2006 and integrated into Hometax in 2015

§ Employees do not have to visit all related agencies to receive documents

v Service does not cover all receipts (ex. donations, housing rents, glasses, etc.) but has been expanding coverage



v In 2017, more than 12 million taxpayers used the system, while 16 million dependents agreed to access their tax settlement information

v Total number of contact (taxpayers + dependents) increased by 6 times from 2006 to 2017

Users of Year-end Tax Settlement System(Unit: 1,000 Persons)

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Taxpayers Dependents

474(2017)

36

C . E f f e c t

2,894(2017)

X 6


e - T a x I n v o i c e S y s t e m ( 2 0 1 0 )8

Definition

Background

① Higher compliance costs under new transaction environment- Transaction environment became more complicated and diversified - Transaction volume grew continuously- Costs for preparing, storing and reporting manual invoices increased

② Need to enhance transparency of tax system - Difficulty remained in identifying tax evaders using false manual tax invoices- VAT-exempt transactions were even more vulnerable to fraudulent tax evasion

③ Digitalization of economy as a favorable condition- Digitalization matured both physical infrastructure and taxpayers’ culture-wise- Large enterprises started to issue tax invoices using ERP1) or ASP2) system

An online tax invoice system which enables online issuance and distribution of tax invoices, and its web-based transmission to the NTS

2010

e-taxInvoiceSystem

2010

e-taxInvoiceSystem

Note : 1) ERP (Enterprise Resources Planning): An integrated management of main business processes, often in real-time and mediated by software and technology2) ASP (Application Service Provider): A third-party entity that provides computer-based services to customers using the internet over a network

37

A . O v e r v i e w



Time e-Tax InvoiceJan,2010 - Introduction of e-Tax Invoice System

Jan, 2011 - All corporate taxpayers

Jan, 2012

- Sole proprietors (taxable supplied value, ≥ 1 billion KRW,previous year)

July,2014

- Sole proprietors (taxable supplied value, ≥ 0.3 billion KRW, previous year)

July,2019

- Sole proprietors (taxable/tax-exempt supplied value ≥ 0.3 billion KRW, previous year)

From a voluntary to mandatory system

38

B . D e v e l o p m e n t

Time e-InvoiceApril, 2013 - Introduction of e-Invoice System

July, 2015

- All corporate taxpayers- Sole proprietors

(taxable supplied value ≥ 0.3 billion KRW,previous year)

Jan, 2016

- Sole proprietors (gross income ≥ 1 billion KRW, previous taxation period )

Jan, 2017

- Sole proprietors (gross income ≥ 1 billion KRW, former taxation period )

July, 2019

- Sole proprietors (gross income ≥ 0.3 billion KRW, previous taxation period)



Issuance Channels

Benefits

① ConvenienceNo need to make a list of tax invoices issued and received

② AccuracyLess cases of omission or error

③ EfficiencyCost cutting for printing, storing, transporting paper invoices

④ TransparencyLess probabilities of producing forged receipts

① ASP or EPR, with standard certification ② NTS system③ Cash receipts system

2010

e-taxInvoiceSystem

2010

e-taxInvoiceSystem

39

C . B e n e f i t s



v Tax base based on VAT returns with e-tax invoice has been continuously increasing, reaching 3,097 trillion KRW in 2017v And tax amount is 280 trillion KRW

v Number of e-Invoice issued for VAT-exempt transactions for 2017 amounts to 66.9 million cases, while its amount reached 446 trillion KRW in 2017

D . E f f e c t

Number of e-Tax Invoice(Unit: Trillion KRW)

2,704 2,775 2,782 2,8543,097

238 246 249 257 280

2013 2014 2015 2016 2017

Tax Base Tax Amount40


N e o T a x I n t e g r a t e d S y s t e m ( 2 0 1 5 )9

Definition A next-generation tax system that integrates all tax-related systems into one

Main Pillars

41

2015

NeoTax


2015

NeoTax


Background

NTIS is comprised of Next-Generation Hometax, an online portal tax payment service, and Tax Administration Portal, an integrated service for NTS internal employees

① Need to modernize the existing Tax Integrated System (TIS)- Tax Laws had been revised and more than 30 new systems had been adopted since 1997- Complex system distorted effective management of data and increased maintenance costs⇨ A fundamental system reform was required

② Administrative and technological capability of Korea- NTS had accumulated e-taxation know-how for 20 years- Matured IT technology made system development feasible⇨ A large-scale project (reorganization of 22,300 programs, 180 billion data) was possible

A . O v e r v i e w



Main Features

Effects

42

2015

NeoTax


2015

NeoTax


① Expansion of pre-filled services ⇨ Reduces compliance costs of small taxpayers in particular② Expansion of mobile services⇨ Provides more convenient access for taxpayers③ Improvement of advance e-notice⇨ Facilitates voluntary tax filing

① Integrated system, customized/ubiquitous tax service and proactive guidance⇨ Reduces compliance costs and helps build honest tax culture② Accurate analysis on tax sources and investigation, real-time information sharing⇨ Prevents tax evasion and maximize tax revenue③ Improvement of internal work system and integrated communication network⇨ Increases productivity of NTS and reduces administrative costs

B . M a i n F e a t u r e s



C . S e r v i c e s o f H o m e t a x

43

Main Services of Hometax

Source: National Tax Service



44

Before Service After

• A number of websites established and operated independently• Different login and authentication procedures

Access to Websites

• Eight independent websites integrated into one portal• The standardized user authentication system

• E-Filing only available for periodic tax filing • Limited pre-filled service

Tax Items for E-filing

• E-Filing available for all tax items except for inheritance tax• After-due-date filing, amended filing and request for correction

available• Expanded pre-Filled service (43 categories were added)

• Some attached documents and evidential documents unable to be submitted through e-filing

Document Submission

• Any attached documents or evidential documents submitted in PDF format available for e-filing

• Limited online tax certificate issuance hours were limited (Weekday 09:00~19:00, Sat. 09:00~13:00)

• Limited number of tax certificates issuable online (20)

Tax Certificate Issuance

• Tax certificates issued 24/7 (available on Sundays and holidays)• The number of tax certificates issuable online increased (41)

• A day or two taken to confirm payment details at the Bank of Korea

Confirmation of Payment • The details of payment immediately confirmed

Main Changes brought by Next-Generation Hometax

D . E f f e c t


Ⅳ. Its Achievements

45


I t s A c h i e v e m e n t s1

v Unit costs has been reduced§ ∆ Cost/business person -11%, ∆ Cost/sales -8.4%, ∆ Cost/tax revenue -13.3%

※ Increase of total compliance costs(+12.4%) was attributable to the increase of number of businesses and inflationv Four main categories of tax administration shows improvement

§ ∆ Certificate issuance -16.4%, ∆ Document receipts -20.9%,∆ Book-keeping -24.8%, ∆ Tax filing and payment -14.4%

A . R e d u c e d C o m p l i a n c e C o s t s

46

(Unit: KRW, %)Trend of Compliance Costs in Korea

Costs Unit 2011 2016Change

Amount Rate

Total Cost TrillionKRW 9.8878 11.1179 1.2301 12.4%

Unit Cost

per business person

Million KRW 1.82 1.62 -0.2 -11.0%

per sales10,000 won KRW 20.2 18.5 -1.7 -8.4%

per tax revenue 1,000 KRW KRW 54.9 47.6 -7.3 -13.3%

Administration 2011 2016 Change Rate

Certificate Issuance 9.6 8.0 -16.3%

Document Receipt 17.2 13.6 -20.9%

Book-keeping 8.3 6.2 -24.8%

Tax Filing and Payment 12.1 10.4 -14.4%

Total 47.2 38.2 -19.0%

Source: Analysis on Compliance Costs of National Tax Administration in Korea (2018), conducted by KIPF

Compliance Costs by Administration



v Significantly enhanced taxpayers’ convenience by providing ubiquitous tax services§ Tax services provided regardless of time and space§ Reduced number of visits to tax offices§ Reduced physical document preparation process

B . I m p r o v e d C o n v e n i e n c e

47

Total Business Owners

(①)

MembersRegistration Rate

(③/①)Total(②=③+④)

Business Owners Non-BusinessOwners

(④)Subtotal(③) Self-employed Corporation

7,362 12,469 6,403 5,538 865 6,066 87.0%

(Unit: 1,000 Persons)Hometax Users (as of Sep, 2016)

v Hometax users have been increasing§ (Visitors) As of the end of 2015, the accumulated number of visitors to Hometax amounts to 2.3 billion§ Since the launch of Next-Generation Hometax, the number of visitors has exceeded 1 billion annually§ (Registration) As of September 2016, the total number of Hometax registered members amounts to 12

million, with a rate of business owners’ registration 87%



B . I m p r o v e d C o n v e n i e n c e

48

(Unit: %)

30

40

50

60

70

80

90

100

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Value Added Tax Global Income Tax Coporate Income Tax Withholding Tax

Trends of e-Filing (2003-2017)

Tax Category 2003 2017 Change

VAT 33.8% 92.8% + 59%p

Global IncomeTax 43.5% 96.5% + 53%p

CorporateIncome Tax 92.7% 99% + 6.3%p

Withholding Tax 60.8% 99.4% + 38.6%p

v E-filing usage rate increaseddramatically, particularly of VAT andGlobal Income Tax§ VAT e-filing grow from by 59%p from

2003 to 2017, marking 92.8% in 2017§ Global Income Tax e-filing increased

by 53%p from 2003 to 2017, scoring96.5% in 2017



C . E n h a n c e d Tr a n s p a r e n c y

49

Cash Receipt System

e-Invoice System

- Toward cashless economy

- Transparent B2C transactions even using cash

- Transparent B2B transactions

- Transparent VAT-exempt B2B transactions

Income Deduction for Credit Card Usage

e-Tax Invoice System

Improved e-taxation system made it possible to track and crosscheck transactional information of businesses and individuals with credible electronic evidences



v Tax base based on VAT returns with e-tax invoice has been continuously increasing, reaching 3,097 trillion KRW in 2017v And tax amount reached 280 trillion

KRW

v Number of e-Invoice issued for VAT-exempt transactions for 2017 amounts to 66.9 million cases, while its amount reached 446 trillion KRW in 2017


Number of e-Tax Invoice(Unit: Trillion KRW)

2,704 2,775 2,782 2,8543,097

238 246 249 257 280

2013 2014 2015 2016 2017

Tax Base Tax Amount50




51

(Unit: Billion KRW, %)

Cards Usage and Cash Receipts in Private Consumption Expenditure

v Total amount of transactions tracedeither by cash receipts orcredit/debit cards reached 92% ofprivate consumption expenditure in2017

v Amount issued by cash receiptsreached 108 trillion KRW

v Amount paid by credit cardsrecorded 655 trillion KRWv 485 trillion KRW by credit cards

(excluding short-term cash advance)v 170 billion KRW by debit

cards(debit + check cards)

Note: 1) Credit card usage excludes short-term cash advance2) Debit card includes check cards and debit cards

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

0

100

200

300

400

500

600

700

800

900

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Credit Card Debit Card Cash Receipt % to Total Private Consumption (right axis)

32%(2004)

92%(2017)60%p



v Development of e-taxation systemcontributed to systematic approach totax sources, resulting in increase oftax revenue§ Tax revenue has increased 4 times

since 1996, reaching 345.8 trillionKRW in 2017

§ Tax-to-GDP ratio (incl. socialcontribution) increased by 7.1%pfrom 1996 to 2017, recording 26.9%in 2017

v Fair and convenient taxation systemreduces tax resistance andencouraged voluntary faithful taxpayment

D . I n c r e a s e d Ta x R e v e n u e

52

(Unit: Trillion KRW, %)

Tax Revenue (1996-2017)

0

5

10

15

20

25

30

0

50

100

150

200

250

300

350

400

Tax Revenue Tax-to-GDP (right axis)

x 4

82.4(1996)

345.8(2017)



v E-taxation contributed to identifyhidden tax sources, leading to broadentax base in generalv Number of taxpayers has continuously

increased from 10 billion in 2002 to17.28 million in 2017

v Number of taxpayers for GlobalIncome Tax amounts to 6.9 million in2017

v Number of taxpayers for Value AddedTax amounts to 6.3 million in 2017

E . B r o a d e n e d Ta x B a s e

53

(Unit: 10,000 Persons)

Number of Taxpayers by Tax Category (2002-2017)

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Total Global Income Tax Value Added Tax

1,007(2004)

1,728(2017)70%



v Number of taxpayers of Global IncomeTax under threshold has decreasedv Number of taxpayers under threshold

decreased from 2 million in 1999 to1.3 million in 2013

v Total number of taxpayers increasedfrom 3.4 million to 5.6 million, resultingin reduction of rate of taxpayers underthreshold drastically from 60% to 23%v The data shall not be counted for statistics from

2014 for accuracy, as the number of taxpayersunder tax threshold and taxpayers subject tofinal tax return are estimated figures,

E . B r o a d e n e d Ta x B a s e

54

(Unit: Person, %)

Number of Taxpayers under Threshold

0%

10%

20%

30%

40%

50%

60%

70%

-

500,000

1,000,000

1,500,000

2,000,000

2,500,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Number of Global Income Taxpayers under ThresholdRate of Global Income Taxpayers under Threshold (right axis)

60%(1999)

23%(2013)


C o n c l u s i o n2

A . C o n c l u s i o n

Fair Tax system Voluntary and faithful tax filing

① Expanding interactions with external institutions② Providing better mobile services③ Using the latest ICT including Big Data④ Developing into a more user-friendly system

Institutional Reform and Technological Innovation for

Better Tax Administration

Future Development

55

Accuracy TransparencyEfficiency

Public trust in tax administration


T h a n k Y o u !

56

e-Tax Administration in South Korea and Its Achievements...44 Before Service After •A number of...

Documents

Transcript of e-Tax Administration in South Korea and Its Achievements...44 Before Service After •A number of...