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Tax administration reform in Korea and its implications

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Frame of Image c conditions and heavy investments in physical and human capital as fundamental to Korea’s economic growth. Where the models diverge is the role government played in mediating the efficient allocation of resources, or not.1 Korea’s industrial policy of targeting certain sectors for investment like the heavy and chemical industries during the 1970s has been used to illustrate the efficient or inefficient allocation of resources at the hands of the government. In both models, the burning question of how Korea was able to ensure macroeconomic stability and make necessary investments in the first place remains largely unanswered, if at all. Here, we posit that Korea’s capacity to mobilize tax revenue, often taken for granted, was crucial in providing sufficient fiscal resources - government savings - to maintain an economic environment conducive to growth, not to mention allow the government to take an active role in economic development. Fiscal soundness allowed Korea not only to manage inflation and induce foreign capital but also to make huge investments in education and infrastructure. 2 It also allowed the government to provide subsidized credit and tax benefits for industrialization and to promote socio-economic policies (Saemaul Movement) for broad based development. Indeed, Korea’s capacity to mobilize tax revenues, and its fiscal implications, cannot be emphasized enough. Besley and Persson (2007) put it more simply: “Economists generally assume the
1 2
See Rodrik (1995)


Full Text
Title Tax administration reform in Korea and its implications
Similar Titles
Material Type Proceedings
Author(English)

Kim, Joon-Kyung; Kim, K.S.

Publisher

Seoul:KDI School of Public Policy and Management

Date 2011
Event

Fiscal Policy and Management

Pages 26
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Economy < Financial Policy
Holding KDI School of Public Policy and Management
Organizer KDI School of Public Policy and Management

User Note

Prepared for World Bank and KDI School Conference on Fiscal Policy and Management on November 14-18, 2011.