[VIEWPOINT]Tax authority needs independenceNo matter the time or the country, taxes have always been something people wanted to avoid and the tax authority has been something people feared. Political authorities have frequently used taxes and the tax authority as a carrot or whip, depending on whatever was convenient.
Back in the days of former President Chun Doo Hwan, the government was determined to keep the inflation rate increases under one-digit figures and demanded that businesses cooperate by keeping their wage increases to one-digit figures. The government promised that the companies which cooperated would be exempt from tax investigations for three years, but those that did not could have their taxes investigated.
By using the investigation exemption as a carrot, the government was acknowledging that most companies were already evading taxes. So the tax investigation of newspaper companies under the Kim Dae-jung administration caused speculation that he was trying to punish newspapers that were critical of the government.
The current government is no exception. It has gotten used to scaring people with the tax card. The government has picked up the menacing tax card to increase both possession and transaction taxes on real estate simultaneously, saying that it will put an end to real estate speculation. In an attempt to take the initiative, the administration has even let tax officials watch over real estate agencies. And this year, because real estate prices did not go down despite the government measure announced on Aug. 31, the government says it will launch a tax probe and even investigate where the people got the money to buy reconstructed apartments in Seoul’s Gangnam area and the new town apartments in Pangyo.
Recently the National Tax Service announced that a survey of high-income earning professionals and independent business owners showed that they evaded taxes on 57 percent of their income. The watchdog even added an analysis suggesting that such tax evasions caused social polarization. In the past, the National Tax Service had strongly denied such allegations and denounced the scholars, who had announced that around 40 to 60 percent of taxes were being evaded, saying they had conducted their research using insufficient data.
It is surprising, therefore, that the agency conducted a random sample survey voluntarily and announced similar results. I think that was possible only because the National Tax Service finally decided to take part in the movement emphasizing social polarization.
The academic world has continuously suggested that the National Tax Service conduct a survey every year and use the results to infer tax-inducing costs and determine tax evasion rates and make them public, as they do in some advanced countries.
Scholars have also asked the National Tax Service to allow tax records, which are kept strictly within the compound, to be accessible for the scholars, which is also done in other advanced countries. However, the National Tax Service refused such requests, saying they must protect individuals’ tax payment information.
Administrations that have used taxes and tax authorities as weapons have always been judged by the people and history. A country can only stand tall when its tax authorities are independent. Making taxes neutral means minimizing tax-collecting distortions. Imposing taxes weakens the economy because workers work less and consume less, and companies invest less.
President Roh Moo-hyun said some time ago that since the top 20 percent of the taxpayers are paying 90 percent of the taxes, the remaining 80 percent of the people should not worry. However the president does not seem to know that taxes always move. If only the top 20 percent have to pay more taxes, they will reduce their working hours, consumption and investments, resulting in a bad economy and reduced tax revenue. Thus, the remaining 80 percent will also suffer.
An independent tax administration does not use taxes as a sword for political interests. Advanced countries not only implement tax policies based on rules and scientific knowledge, but they also guarantee the term of office for the head of the national tax service as a cushion against political interests.
The tax evasion trend in our society needs to be put right by an independent tax administration. Only then, will scaring people through taxing policies fail to work.
The system of imposing temporary taxes before levying added-value taxes and the system of collecting estimated taxes before collecting income taxes should be abolished.
It should be a business standard that trading is done on the basis of records such as tax statements and the ledger. Neutral taxation and an independent tax administration must be a higher priority than alleviating social polarization and increasing taxes.
* The writer is a professor of economics at Sungkyunkwan University. Translation by the JoongAng Daily staff.
by An Chong-bum