Controversy over Examination of Accounts of Taxpayers Owing More than 10 Million Won

A controversy has been aroused since the National Tax Service (NTS) decided to connect their network to the banking financial management network to trace delinquent taxpayers’ financial assets from the end of this month.

The banks are opposed to the connecting of networks, worried that their clients’ information may be hacked into when the taxpayer information is sent back and forth through the network.

According to a NTS internal report titled “Evaluation of the First Half of 2004,” which Dong-a Ilbo acquired exclusively on July 22, the NTS had evaluated plans to share the information through negotiations with the Korea Federation of Banks (KFB) on July 15.

The plans were made to follow the recently revised act on “real-name trade systems and protection of confidentiality,” which allows inquiries to the head offices of financial firms into the financial trade information of late taxpayers with more than 10 million won in delinquent taxes.

The NTS plan is to connect its network to the network of bank head offices through KFB’s network, and then receive the results of its examinations of accounts.

The NTS evaluated the plan with a comment in the report, saying, “It is a well-designed plan that is a starting point for an efficient model of how to refer to financial information in the future.”

However, there are indications that the NTS plan violates the real-name financial system.

The NTS plan violates the real-name financial system’s principle of confidentiality because it refers to information through the KFB. However, according to the real-name financial system, only head offices of financial firms are allowed to make such references.

An anonymous official of a bank said, “When the network is finished, more work will be given to the banks due to the increased demands imposed by the examinations of the accounts. Considering previous practices, bank expenses will also be increased because the costs of examination will be shifted to the banks.”

Although the NTS has to pay banks for mail notification to the subjects of examinations, the costs are not included in this year’s budget. Saying that there is no legal basis, the NTS is also not paying for the commission of examinations.

Accordingly, the KFB has delivered negative comments on a working-level basis, and is planning to deliver its official standpoint.

Lee Myung-lae, assistant commissioner for Taxpayer Services, said about the matter that “the network is only a plan in preparation for a large number of examinees, and nothing is decided yet. Also, most financial information is already computerized, so not much time or manpower will be required for examinations.”

Ji-Wan Cha cha@donga.com