A Study on the Improvement of Filing Tax Return under Estimation
Asian Tax Journal Vol. 7 No. 4 (2006), pp. 109-131
Abstract
Almost half of income taxpayers file tax returns based on the 'estimation of income tax by tax authorities' system rather than by bookkeeping. Some argue that the estimation of income tax system cause inequality between taxpayers. The tax authority adopted the basic expense ratio system instead of standard expense ratio system beginning in 2002. This paper examines problems of new system and suggests some alternatives.First, tax return by the estimation of income tax system should be abolished (except for the very small taxpayers). Scope of basic expenses should be expanded. The simple expense ratio using the upper limit of income tax reporting should be abandoned.Second, taxable income reconstruction techniques should be developed. Net worth method and bank deposit method and other reasonable methods can be adopted instead of basic(simple) expense ratio method.Third, criteria for simple bookkeeping system under the value added tax law and basic expense system under the income tax law should be conformed to reduce compliance costs and encouraging self－bookkeeping. A fixed amount of bookkeeping tax credit along with the percentage of income tax payable, should be also allowed. Tax investigation for taxpayers with no books and records be more enforced and small taxpayer group with voluntary book－keeping should have more tax benefits.
Keywords
- tax return by estimation of income tax
- basic(simple) expense ratio
- self-bookkeeping
- tax credit for bookkeeping
- taxable income reconstruction techniques
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