This study forecasts tax revenues from value added tax, special excise tax, and liquor tax, as well as changes in tax revenue in accordance with the decrease in indirect taxes rates.
Korean taxation structure is retrogressive, because the proportion of indirect taxes is relatively high to the proportion of direct taxes. Therefore, the reorganization of the tax system should decrease the relative proportion of indirect taxes. However, since tax burden of Korea is relatively low and tax collection effort index is also low, it is advisable to increase indirect tax revenues rather than decrease indirect tax revenues through a decrease in indirect tax rates. Despite retrogression, tax revenues should be secured prior to their use for progressive tax expenditures. Also, the application of multiple tax rates is reasonable, according to optimal taxation theory, but it is difficult to apply in reality. It is not advisable to differentiate the existing base rate of value added tax. However, it is appropriate to apply varying rates to specific items, since the application of differentiated rates is necessary for both fairness and effectiveness.
In the existing indirect tax system, it is necessary to add tax-free and zero tax rate items subject to value added tax, switch from tax exemption to taxation, add or remove items subject to special excise or liquor tax, and adjust tax rates. First, in the case of value added tax, it is advisable to readjust the sales limit of a taxpayer subject to special treatment in taxation. Tax rates for taxpayers subject to special treatment in taxation should be differentiated according to value added, rate without complicating the administration of tax collection. Also, only truly small-scale business should receive the benefits of this system, which can be accomplished by strengthening tax administration. For the livestock and fishing industries, feed should be tax free, in line with other first industries. It is reasonable to make health and medical treatment service taxable, among presently tax free items, and make income from monthly rents tax free. For the case of special excise tax, tax rate for first class items should be lowered to protect small and medium sized companies and improve export competitiveness. On the other hand, designer clothing over a certain price and luxurious interior decorations should be subject to first class special excise tax.“Second class” items regarded as living necessities, including small color televisions and refrigerators, should be exempted from the items subject to special excise tax. From third class items, popular products should be exempted. For fourth class items, this study recommends a switch from ad valorem tax to unit tax, and reduction in the gap between gasoline and other types of oil. Finally, in the case of liquor tax, the system needs to be reorganized according to the revenues from uncompetitive liquor types, and differentiated tax rates should be applied in order to promote competition in an inflexible market.
간접세 개편방향 연구(Study on reorganization of indirect taxes)
[서울] : 한국개발연구원
|Series Title; No||정책연구시리즈 / 91-06|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|
|Holding||KDI; KDI School|