(LEAD) Biz community calls for easing tax audit burden
SEOUL, March 17 (Yonhap) — The South Korean business community on Tuesday called for easing the tax audit burden and more deductions for corporate entertainment outlays to better reflect the rise in overall expenses.
In a meeting with National Tax Service Commissioner Lim Hwan-soo in Seoul, companies belonging to the Korea Chamber of Commerce and Industry (KCCI) said there is a pressing need for the government to buoy corporate investments and fine-tune the way it conducts audits to not interfere with legitimate business activities.
Audits require top management and employees to focus on providing documents to tax officials that divert them from their work.
Lim said in a keynote speech that every effort will be made this year to ease tax audit burdens on those that pay their taxes in a diligent manner. He said there will be fewer audits carried out on small and medium enterprises (SMEs) while administrative changes will be made to make it easier for ordinary people to pay their dues.
“South Korea’s economy is entering a critical stage that requires a team effort by businesses and the government,” said KCCI Chairman Park Yong-maan. He said the business community is committed to paying its taxes and fulfilling its role of bolstering the country’s fiscal stability.
The NTS said it aims to collect 46 trillion won (US$41 billion) in corporate taxes this year.
Foremost of its demands, the KCCI, one of the country’s leading business bodies, said that the NTS should give more leeway to companies that have consistently paid taxes in a diligent manner, even if they are relatively large firms.
The government said it will hold off on conducting audits in 2015 for companies whose sales are below 100 billion won so they can focus more on growth.
Members of the KCCI said the limit on corporate entertainment expenses should be raised. It currently stands at just 12 million won, unchanged from 1998. Beside the base allowance, tax deductions equal to 0.03-0.2 percent of sales are given depending on the size of the firm. The government agreed to raise the base limit to 24 million won for SMEs by late 2016.
“The entertainment expense limit needs to be adjusted to reflect rises in prices over the past 18 years, especially since such spending can fuel domestic consumption,” the KCCI said.
In addition, businesses called for more lead time before audits are started and the introduction of a tax audit result review meeting that can allow companies to review what was found amiss and get a better understanding of how much extra taxes they need to pay.
Companies said the government should also move to better explain the country’s so-called transfer pricing rules to foreign tax services so that South Korean firms with branch operations abroad are not slapped with more taxes than are warranted. For example, Vietnam has increased the number of companies it is checking for irregular transfer pricing from 1,268 in 2012 to 2,110 this year.
Transfer pricing refers to moves by multinational branch offices to buy products from their parent company at higher-than-market prices and to report such purchases as a way to pay less taxes in the country they are located.
They said authorities should consider measures aimed at reducing the tax burden of entrepreneurs who have inherited SMEs with annual sales surpassing 300 billion won. Unlike entrepreneurs who inherit small-size family businesses, people who take over “larger” companies are not given the option of paying inheritance taxes in long-drawn-out installments.
