Abstract

The Compliance Verification System(“CVS”) entrusts part of the tax audit procedure to the private sector, and is based on a tax verification system that requires high－income self－employed people suspected of evading income to be confirmed by their tax representatives before reporting income tax. CVS is mandatory only for private businesses of a certain size or larger and corporate businesses similar to individuals. On the other hand, the Horizontal Compliance Agreement (“HCA”) provides administrative services that can resolve tax uncertainty in a timely manner by signing a gentleman’s agreement between corporations and tax authorities that meet certain requirements. The current CVS, which completely excludes the application of the horizontal sincere tax payment system while forcing all individual businesses of a certain size or larger to confirm sincere reporting, significantly infringes on the rights and interests of individual taxpayers. The goal of this study is to present a plan to improve CVS that can protect the rights and interests of taxpayers and enhance the horizontal cooperative relationship of tax administration. Specifically, a plan was proposed to operate the CVS in an integrated manner in connection with HCA. In principle, all individuals and corporations of a certain size or larger should be subject to CVS, but it is necessary to gradually expand the scope of HCA based on the integrity of the financial statements. In order to overcome the vertical and authoritarian tax administration approach, to establish a horizontal and democratic tax system, CVS should be restricted according to the degree of compliance, HCA should be extended based on the enhanced relationship between taxpayers, tax practitioners, and tax authorities.

Keywords

• self－assessment system
• taxpayers’ right
• Compliance Verification System
• horizontal monitoring
• Horizontal Compliance Agreement

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