Quadruple jeopardyAn automotive parts maker based in Yeongcheon, North Gyeongsang, received a visit by public tax auditors twice over a year. One was in October last year by the National Tax Service and another last week by the North Gyeongsang Province government.
This is not the end of the story. The company has been warned of another tax audit early next year. This is due to a revision in the local government tax code in 2013, allowing local governments to conduct tax audits on regional companies.
Previously, the central government handed out 10 percent levies from companies through corporate and income taxes to local governments.
After the law, local governments were authorized to collect taxes from companies in their jurisdictions. This has caused a huge hassle for companies with operations spread out in many parts of the country.
For instance, Samsung Electronics is based in Suwon, Gyeonggi, but it also has operations in six other areas. It could receive tax audits in seven different places.
The business community has been complaining that business has been interrupted because 226 district, county and city governments were all making separate tax audits. The government was startled by the unexpected hiccup in its policy.
In April, the government decided to revise the law so that tax audit authority was returned to the national tax office.
The bill was submitted by the ruling party, and the change was included in the government’s bill on revisions of tax codes in August. But the legislative process has not been easy, due to strong opposition from local governments.
Incheon Mayor Yoon Jeong-bok stood at the forefront in opposing the legislation stripping local governments of the right to corporate tax probes.
Korean companies already saddled with enough problems cannot afford to spend their resources to prepare for tax audits throughout the year. Such regulations can only dampen corporate activities.
If public offices sincerely desire a revival of the Korean economy and more investments, they must simplify the taxation process by giving the audit authority back to the national tax agency and leaving the authority to change and revise corporate tax bills to local governments. Otherwise, companies face double, triple and quadruple jeopardy.
JoongAng Ilbo, Oct. 24, Page 26