A Study on Measures to Popularize Book-keeping among Minor Businessmen
Asian Tax Journal Vol. 9 No. 3 (2008), pp. 35-72
Abstract
The corporation tax, income tax and value-added tax (VAT), all classifiable under the 'self-assessment system', may be said to be the mainstream in the current Korean tax system. Under the 'self-assessment system', tax payers are allowed to determine themselves the amount of tax to pay, for which nothing seems more important than the taxpayers' will for voluntary compliance. The taxpayers' will for compliance in this context means their willingness to compute tax exactly in the prescribed way. Only when taxpayers calculate their tax amount on the basis of book entry which is most fundamental for this system, it is then plausible to expect the current 'self-assessment system' or fair taxation as a whole to go successfully. In order to secure such fairness in taxation, it is preemptive to have complete information about all transactions and incomes of taxpayers. In case of wage earners, all sources of their income are laid bare without reserve, while the incomes of the self-employed are not fully monitored, because most of them do not keep accounts that should normally serve as basis for examining incomes. It will be quite impossible to look forward to fairness in taxation vertically as well as horizontally on such fragile ground. In a bid to deal with this situation, it is imperative to recommend taxpayers to maintain accounts of their transactions to enable them to offer the basis for computing tax amount to pay. The present paper aims to join efforts to improve the tax politics by mainly exploring measures to spread book-keeping among self-employed businessmen. This study builds up its theory for finding means to generalize bookkeeping among operators of small scale business. For this purpose, research is made first concerning obligations for taxpayers to keep books as stipulated in the Korean tax laws such as the Basic National Tax Act, Value-added Tax Act, Income Tax Act, Corporation Tax Act, etc., and then five suggestions are made as approaches to generalize bookkeeping as follows : First, extensive support should be provided for operators of small-sized business and measures must be worked out to create transparent environment for economic activities and to bring the underground economy to light; Second, measures are suggested to streamline simplified taxation system pursuant to the Value-added Tax Act and to tighten the requirements to receive tax reduction. Moreover, it is suggested to expand the scope of obligations to keep books as stipulated in the Income Tax Act and to intensify the programs for public relation and education to promote consciousness of tax payment; Third, it is sought after to lay bare as much amount of cash transaction as possible and suggested to widen the scope of approved expenditures against evidence. Besides, it is tried to improve or strictly control issuance of tax invoice; Fourth, emphasis is placed on expanding the scope of tax exemption for bookkeeping and increasing penalty tax for ommission or non-entry in an effort to offer more advantages on taxpayers who declare booked accounts faithfully. It is also considered to oblige taxpayers to submit financial statements to the bank when opening or making accounts with it; and Fifth, as a measure to utilize tax agency in a try to lessen difficulties facing minor businessmen, it is discussed to establish measures to popularize bookkeeping by way of tax agents.
Keywords
- self-assessment system
- popularization of book-keeping
- minor businessmen
- corporation tax law
- income tax law
- value-added tax law
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