Effects of Exterior Tax Adjustment and Practical Plans to Revise It
Asian Tax Journal Vol. 13 No. 4 (2012), pp. 247-277
Abstract
This study is to provide academic backgrounds for stable progress of the “exterior tax adjustment” (“ETA” hereafter). Theoretical analysis shows that ETA service has the features of public goods and the external economies, which survey analysis to tax officials also implies. Therefore various incentives for ETA service should be provided to prevent the failure of market, which might be caused by those features. Empirical analysis, which was made to tax officials, the most important beneficiaries of ETA service, shows that, in case of personal income tax returns, ETA service increases the tax－book income ratio and decreases the degree of tax credits, which supports the positive effects of ETA. That is, ETA service could be deemed to affect the faithfulness of personal income tax returns and, as a result, necessity to promote ETA services through tax laws could be backed up. Practical plans to promote ETA service, by strengthening its economic effects and sheltering it from outside criticism, include supplementing ETA’s legal basis, expanding obligatory ETA business and applying tax laws on imposition exclusion preriod and penalty taxes favorably to such business.
Keywords
- Exterior tax adjustment service
- Public goods
- External economies
- Personal income tax returns
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