Cash Receipt Rule to Include Hostess Bars

Adult entertainment establishments such as room salons (high-class hostess bars) might have to issue from July receipts for cash payments exceeding 300,000 won (262 U.S. dollars).

“We required professionals to issue receipts for cash transactions last month and have reaped a great result of a 50-percent increase in the volume of receipt issuance,” a National Tax Service source said Thursday.

“To find more hidden revenue sources, we’ve sent a letter to the Strategy and Finance Ministry asking that the cash receipt rule cover adult entertainment facilities.”

A ministry source said, “Since this is an official suggestion, we will decide whether to revise the decree through consultation with the National Tax Service.”

Businesses that must issue cash receipts from July will include room salons, nightclubs and cabarets. The tax authority said the rate of unreported income is as much as 70-90 percent of combined income at such establishments.

This figure was reached based on tax audits on businessmen suspected of tax evasion, but is still much higher than the average rate of unreported income of 40-something percent.

The source said, “Requiring adult entertainment facilities to issue cash receipts needs no approval from the National Assembly because related regulations were revised, so the rule can take effect from the second half of this year at the earliest.”

If the rule is effected, adult entertainment facilities must issue a cash receipt even if a customer does not ask for one for a purchase of 300,000 won or more.

A customer reporting a business that failed to issue a cash receipt will receive 20 percent of the purchase amount (up to three million won or 2,622 dollars) in reward money. If a customer who wants to remain anonymous shuns the receipt, the establishment must issue a cash receipt in the designated code of the National Tax Service (010-000-1234).

If no cash receipt is found to have been issued, the penalty is half of the purchase amount. The tax authority source said, “If a customer is offered a discount for paying cash, a business cannot earn a profit because it will have to pay a penalty and accumulated taxes if found not to have issued a cash receipt.”

High-income professionals such as lawyers and doctors, wedding and funeral halls, and real estate agents must issue cash receipts because of their high volume of cash transactions.

peacechaos@donga.com