Tax payment fulfillment and its duty thereof is legally enacted by meeting the requirements of taxation pursuant to the rules of the tax law applicable and, specifically, confirmed by the relevant procedures and guidelines by both taxpayers and tax of...
Tax payment fulfillment and its duty thereof is legally enacted by meeting the requirements of taxation pursuant to the rules of the tax law applicable and, specifically, confirmed by the relevant procedures and guidelines by both taxpayers and tax offices. Confirmation of tax payment fulfillment and its duty thereof can be, in some cases, automatically finalized without necessitating any additional confirmation procedure, but in the majority of cases due diligence requires a notice of confirmation to tax payers from the relevant tax office regarding the finalization of the tax process. The particular authority of tax offices to finalize the tax liabilities of tax payers is referred to as the imposing authority. After the confirmation notification regarding tax payment fulfillment and its duty thereof, including its finalization, should an error or omission be found in such a notification or finalization, tax offices have the right to exercise their imposing rights and revise the contents of the notification or finalization process in question.
However, given that the number of tax payers has been increasing and that the economic transactions which are subject to taxation have become increasingly various, the tax system has consequently become more highly professionalized and complicated, with the result that the unlimited exercise of imposing authority by the relevant tax office is likely to result in unstableness in the taxation and legal systems used to govern taxation, which is not desirable result to be desired. Therefore, for the purposes of ensuring the legal stability of tax payments, the legal system provides with regards to tax effective constraints and limitations on the tax levying period, only within which can the imposing authority exercise its authority on tax claimants, and with the consequence that such rights cease to exist upon the period in question having elapsed. Accordingly, there still exist many special acts provided for the limitation of the applicable period of tax levying, for the purposes of reducing the government’s difficulty in exercising its imposing authority.
The twin purposes of enacting a limitation to the period applicable for tax levying in order to reduce any difficulties in the exercise of the government’s right to collect taxation and, concurrently, to secure stability in the legal system with regards to taxation, have contrary positions between tax creditor and debtor. Consequently, it is necessary to conduct a detailed review in order to accomplish the desired purpose of taxation policy and its legal framework.
Thus this research institute has suggested ways for the solution of such problems by reviewing with respect to the limitation period of tax levying applicable in tax law in view of securing an effective legal framework for the tax system and, additionally, with a view to solving any difficulties the government and its tax office may have in the exercise of their rights to the collection and imposition of taxation. Furthermore, this research institute has thoroughly examined the process used for the limitation to the period applicable for tax levying and also both its advantages and disadvantages and, based on this examination, this research institute has suggested improvements to the taxation system.
First, the current provision on the limitation to the period of tax levying applicable in tax law includes an provisions which are excessively comprehensive, to the extent that is uncertainty, which often leads to contestations, between tax offices and tax payers. In particular, in interpreting 'fraudulent or other unlawful conduct' which respect to a limitation period of tax levying that can be applied for a longer duration, tax offices are liable to interpret this period too excessively to the extent that it infringes upon the property rights of the tax payers. Furthermore, in the case of an appeal claim for tax payers whose rights or benefits have been infringed upon by either the illegal or unjust treatment by a particular tax office, there are special acts provided for the limitation to the period of tax levying applicable. Even though the purpose of such legislation is to consider tax payers in addition to achieving the legal stability of the limitation to the period of tax levying applicable, any expanded interpretation of 'necessary measures' brought about by such legislation is problematic.
Also, the current framework provided by the Act on National Taxation does not provide any limitation to the period of tax levying applicable for a possible secondary liability of tax payment, with the consequence that there is problematic uncertainty in view of the security of relationship between the law and taxation system.
In addition, should the tax payer have been found to have done double bookkeeping, the tax office has the right to apply a limitation to the period of tax levying applicable, so that it interprets the case as the bookkeeping that has been submitted to the tax office as being non-identical to the actual bookkeeping records that the tax payer in question keeps. To prove the existence of double bookkeeping, it is necessary for the relevant tax office to confirm it by first conducting due diligence by carrying out an investigation. However, considering the excessive work loads of tax offices, it is likely that such investigations would be overly burdensome to the office and, consequently, difficult to implement. As a result, considering double bookkeeping as inevitable for the majority of income omission cases, the tax office should be able to apply an extension to limited period of time possible for tax levying, even if the double bookkeeping case has not been confirmed by investigation. On the other hand, should there be a problem with the application of the extension to the limited period of time possible for tax levying, such an extension should not be applied in the case that the tax payer omits to notify the tax authorities of the amount, nor that it be found subject to unlawful acts pursuant to current legal guidelines. Thus, it is necessary to improve the taxation framework by legally enacting the application of longer period of tax levying possible, even in the case of substantial omission of any notification; accordingly, this would relieve the burden of proof on tax offices.
Next, regarding the process of application of the limitation to the period of tax levying, in the case of items which are to be provided for the notification of their standard of assessment and tax amount, the value date is uniformly provided as date following the legal notification period. However, the value date for the limitation to the period of tax levying applicable refers to the date of tax offices exercising their imposing authority. Thus, like a claim for a tax return submitted after its due date, should the legal notification period become lapsed in cases where the tax payer reports the standard of assessment and tax amount on his/her own, tax offices may exercise imposing rights immediately. Therefore, in the case of a claim submitted for a tax return submitted after its due date, it is necessary to improve by legislation by setting the reporting date as the value date for the limitation to the period of tax levying applicable. In the case of the disposition of additional earnings, there is not a separate provision with respect to the value date for the limitation to the period of tax levying applicable, and the imposing disposition upon the immediate expiration of the limitation to the period of tax levying applicable excludes the pre-taxation review claim, so that such problems are consequently reviewed.
Finally, with respect to the advantages and disadvantages of the system of having a limitation to the period of tax levying applicable, in the cases of inheritance tax and gift tax, which is an item relevant to the official taxation assessment system, there is currently the application of an excessively long limitation period of tax levying, when compared with that for general items. However, current tax offices are equipped with taxation infrastructure such as TIS, so that in the cases of inheritance tax and gift tax, considering the fact that the exercise of taxation rights of the relevant tax office is of increased convenience, the current legal system should be considered for an improvement, by which there is the application of a longer limitation period of tax levying in the cases of inheritance tax and gift tax. Also, in the case where a tax subject possesses inherited property or gifted property held in a third party's name or through a change in his/her legal name, or in the case that a tax subject evades the proper amount of taxation payable by the omission of the correct notification of the properties located in foreign countries, there is a special act provided for the exercise of imposing rights within one year from tax offices being alerted to the existence of such an inheritance or gift. However, such special acts on the limitation period of tax levying applying is liable to lead to problems by providing the means for tax offices to exercise imposing authority without an effective limitation to the taxation period applicable. Furthermore, there is the limit to its application to property of a value exceeding 5,000,000,000 Korean Won, with the result that there is discrimination among tax payers based upon taxable amount payable. Thus, it is necessary to limit such special acts on the limitation to the period of levying for taxation applicable by abolishing the limit by property value and, additionally, to limit the cases where the tax office cannot actually exercise imposing authority, for example in cases where a tax subject fails to perform his/her duty of notification with respect to the beginning of the inheritance procedure or where there is a title registration under a third party's name.