A Study on Sanctions for the Incorrect Tax Invoice, on its Excessiveness and Mismatch
Asian Tax Journal Vol. 25 No. 4 (2024), pp. 53-76
Abstract
The current VAT system of ROK has used the tax invoice as a tool for the mutual check of transactions and the revelation of hidden tax source, but it has focused on the formality of the tax invoice rather than its substance. Due to such nature, the VAT Code has applied the same nondeduction of input tax credits on the fake tax invoice without real transactions and the incorrect tax invoice with real transactions but insufficient formal requirements. In some cases, the incorrect tax invoices have the same defect as fake tax invoices, but in many cases they do not. Therefore, unconditional sanctions such as ‘Procrustes’s Bed’should be avoided and reevaluated. As a way to improve this, previous studies have proposed a differential imposition of additional penalties than non－deducting input taxes. However, in some cases, if the supplier evades the sales tax, there is a problem that only the recipient’s input tax is deducted without the output tax payments. Tax evasion may or may not occur among incorrect tax invoices, so it is necessary to classify them according to the level of punitive disposition. Under this background, this study proposes to amend the current VAT law so that the input tax can be deducted even if the incorrect tax invoice is received, set a limit on input tax that can be deducted and the input tax can be deducted based on the non－evaded sales tax. This method of deduction can reflect the actual facts and circumstances on the particular incorrect tax invoice. And as a responsibility for receiving the incorrect tax invoice, the input tax is deducted based on the non－evaded sales tax, so it can alleviate the refusal to pay tax and take responsibility in proportion to the wrong degree.
Keywords
- incorrect tax invoice
- fake tax invoice
- non－deduction of input tax
- deduction method
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