National Tax Service

National
Tax Service (NTS) Commissioner Sang Yool Han was invited to speak before the
members of the European Chamber of Commerce in Korea(EUCCK) at its April
24, 2008 meeting. Addressing a group of business men and women representing
companies that collectively account for the largest share of foreign direct
investment to Korea, Commissioner Han talked of the NTS policy goals towards
creating a tax environment favorable for foreign companies. Attendants were
also invited to voice their opinions on the factors that make doing business
difficult for foreign investors like themselves, while Commissioner Han offered
responses to each question and comment.  

At
the session, Han committed to earning the trust of the foreign business community
by pursuing reforms aimed at bringing tangible improvements in administrative
practices and systems. Such efforts, according to Han, are centered around the
three action plans of improving tax certainty, providing highest quality taxpayer
service, and encouraging voluntary compliance. These goals are aligned with
the three principles of transparency, consistency, and predictability that were
embodied in the EUCCK\'s "A380 proposal" for an advanced Korea, he
emphasized.  

First,
measures the NTS embraced to enhance tax certainty include: The introduction
of an advance ruling system with which taxpayers will be able to establish the
tax consequences of a pre-described transaction and the application of Six
Sigma standard of quality to assessments so as to achieve noticeable reductions
in mis-assessments. The improvements achieved as a result of these initiatives
will help enhance business predictability and legal stability for investors.

Second,
on the service front, Commissioner Han vowed not to remain complacent with some
of the NTS services that have already gained world-class status, such as the
online Hometax service. Instead, the NTS is pushing even harder to deliver better
services, notably by listening closely to taxpayers and promptly reflecting
their opinions  in tax administration. He cited some recent examples of
the NTS taking heed of foreign investor feedback and taking immediate remedial
action.

 ◎
Earlier notices of a tax audit for foreign companies (effective as of January
30, 2008)

     -
As of January 30, 2008, the NTS extended the advance notice period given to
overseas       companies from the previous ten days to fifteen days, accounting for
the extra time these        firms require in communicating with their overseas headquarters.

Also
scheduled for this year, explained Commissioner Han, is the implementation of
the Voice of Customer (VOC) System that will offer tax authorities a structured
framework with which to respond to taxpayer needs on a much timelier basis.

The
NTS is also seeking to adopt the Standard Cost Model employed among OECD members
for the purpose of identifying and measuring the components of taxpayer compliance
cost. Using the model, the NTS will be able to reduce those costs that taxpayers
believe arise unnecessarily or in excessively large amounts.   

 ◎
Compliance cost: Time and money a taxpayer spends (separate from the taxes
 paid)        in the course of paying taxes, such as for the receipt and maintenance
of        documents, and  preparation and filing of returns.

 ◎
Standard Cost Model: A model developed to measure the impact of government
       regulations on corporate activities and used widely among OECD members
                           in measuring
the cost of compliance.

        -
Breaks down the
tax filing and payment process into smaller standardized units (e.g.,           receipt
of documents, tax reconciliation, tax return filing, etc.) to calculate compliance
          cost

Recognizing
that becoming more attuned with taxpayers\' opinions and reflecting those in
policies are vital to achieving any substantive service improvement, Han explained
that the NTS has organized an independent-member committee whose main role is
to pinpoint on a regular basis areas that need reform. He went on to ask the
members of the EUCCK to offer their views or comments to the NTS.

The
third message Han delivered touched on taxpayer compliance. Korea\'s focus for
the past two years in relation to tax audits has been to keep the number and
duration of audits to a minimum for compliant companies. However, non-compliant
businesses that engage in unacceptable tax minimization arrangements, such as
aggressive tax planning, to achieve unlawful reductions in tax will be brought
to account.

The
speech was immediately followed by a question and answer session, during which
Commissioner Han gave responses to each of the questions asked. He wrapped up
the session by pledging to offer more opportunities for foreign investors to
voice their thoughts and for him to listen to those thoughts first hand.

In
closing, Commissioner Han reminded the audience of how the free trade agreement
between the EU and Korea will more investment opportunities in Korea
and ensured investors that priority will be placed on removing tax issues out
of the way.

  -
Time and date: 11:10～13:00, Thursday, April 24, 2008

  -
Venue: Emerald Room (2nd fl.), Lotte Hotel, Sogong Dong

  -
Audience: Approximately 100 business men and women representing the members
of the                         EUCCK, including EUCCK President Jean-Marie Hurtiger