Take Plastic, or Face an Audit

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Take Plastic, or Face an Audit

The National Tax Service said Tuesday that it will assume that most businesses, other than ones of a minuscule size, are evading taxes if they refuse to accept credit cards.

The service said it will invoke a provision of 1998 amendments to the value-added tax law to require all businesses that have annual sales of more than 24 million won ($18,500) to accept plastic money. Only businesses that deal in goods or services not amenable to credit card transactions will be exempt, the service said, citing video arcades, trailer truck operators, apartment management companies, automobile dealers and company cafeterias and stores as examples.

The new policy will result in a massive increase in the number of firms which must accept sales by credit cards.

"The measure is intended to shine a light on turnover by businesses," said the agency's value-added tax division director, Kim Ho-ki, "and bring the tax base closer to the real level."

The law on value-added tax, amended in 1998, gives the agency sweeping power to designate classes of business entities to require credit card acceptance. Businesses that refuse to make arrangements to accept credit card payments without due cause can be presumed, under the law, to be attempting to evade taxes, and the agency can initiate audits or other actions to verify tax filing information.

The agency said businesses will have until July 31 to make final arrangements with credit card companies. Audits will begin in August for those that fail to do so.

Mr. Kim stressed the benefits to businesses - honest ones, at least - of accepting cards. "The business can claim 2 percent of payments made by credit cards as tax credits," he said. The ceiling on the tax credit is 5 million won.

The measure is described by the agency as the final step in its efforts, which began in 1999, to get control of Korea's underground economy. "The service will be shifting its focus to businesses that do have arrangements with credit card companies but balk on accepting cards at the counter," Mr. Kim said.



by Lee Hyo-joon

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