[Opinion] A Business-friendly National Tax Service

National Tax Service (NTS) investigators raid a big corporation to seize records and to examine them closely. The reason for the investigation is tax evasion. Consequently, employees stop working. This is what is called a “special tax investigation,” known to be the most rigorous form of investigation. If a highly controversial case like tax evasion is reported, investigators analyze the case for a long time. When there seems to be a lot of suspicion of intentional and malicious tax evasion, they begin to investigate. But in the past, many investigations were conducted as political retaliation.

Companies subject to tax investigation fall into a panic. They just wait and see to grasp the scale of taxes they must pay later. Sometimes, they make a deal to settle the additional taxes. The chairman of a small business, who was subject to a tax audit two years ago, said, “We were in serious trouble when the investigators, who failed to find evidence of tax evasion, tried to dig-up other charges. We made a deal with them to pay the tax service the amount they set as a goal.” Though investigators no longer accept invitations for a free meal, but they still investigate companies without clear evidence.

Businesses fear the unpredictable tax service, because of the conduct of over-the-top tax investigations, which collect taxes to meet the goal of the tax service, and rely more on the industry’s average earnings than on accounting books all the while requiring companies to keep books. When businesses experience such tyranny, employees say they lose their enthusiasm to work hard. Companies face tax risks as well as financial and labor challenges. Han Sang-ryul, the head of the NTS, announced that the agency would reduce tax investigations in line with the policies of the incoming Lee Myung-bak administration, but businesses do not seem to buy it.

Han said on Thursday that he would introduce a new system under which the NTS gives legally binding answers to questions from businesses regarding taxation. In other words, it will finally drop the retaliatory tax investigation that the Kim Dae-jung administration used to punish the press. Back then, the NTS charged some media companies for tax evasion, even though they kept proper accounting procedures. But in most cases, the companies failed to win the lawsuits. Truly being pro-business does not mean turning a blind eye to businesses involved in tax evasion but having the government do its job in a fair manner and eliminating the practice of accepting favors.

Editorial writer Hong Gwon-hee, konihong@donga.com