Tax administration in digital transformation

Lee Eun-hang

By Lee Eun-hang

On March 27 in Santiago, Chile, National Tax Service (NTS) Commissioner Han Sung-hee delivered a presentation on the subject of “Future Tax Administration Using AI Technology and Big Data” while 53 other commissioners from across the world and representatives of international bodies the International Monetary Fund (IMF) and World Bank were present.

These leaders showed keen interest in Han's speech and acknowledged that Korea was unquestionably a leading country in the field of the digital transformation of tax administration.

Over the past decades, the NTS has successfully incorporated IT technologies within its administration.

Hometax, e-tax invoice, cash receipt and other similar programs have empowered our capacity to reduce tax compliance costs and improve efficiency in administration.

Since first introduced in 2002, Hometax has become a common tax platform in Korea with 15 billion visitors every year.

Starting from services like e-filing, e-payment, and e-issuance of tax-related documents, it now supports taxpayers dealing with most tax affairs on the platform.

Along with Hometax, as NTS launched e-tax invoice program in 2011 to let tax invoice be issued digitally, which currently takes up 99 percent of entire tax invoice issuance, it has cut down tax compliance cost on preparing documents and accelerated work process in tax filing, tax refund, and other relevant tax affairs.

Last but not least, based on the tax deduction policy for people who report cash transactions by using cash receipts, the NTS has remarkably secured tax transparency.

Having observed this success, the digitalization of Korean tax administration not only satisfies domestic taxpayers but has also attracted global attention.

Vietnam is one of those countries expressing interest in the success of the NTS, and is now planning to benchmark the e-tax invoice program to all its tax offices from next year.

Based on the surging demand by many countries to learn our advanced e-tax administrative system, to fulfill its responsibility as a leading country, the NTS has devoted itself to support the capacity building of tax officers from developing countries, and sharing the NTS's experience on its e-tax administration system over the past years.

The NTS' e-tax administration was developed in-house rather than by outsourcing.

Due to such an approach, the NTS was able to learn how to resolve various challenges a developer could face in the process of developing a system.

Such experience and know-how have been put on the priority list to benchmark by developing countries where introducing e-tax systems is considered.

During the last two years, the NTS has provided training programs for 138 tax officials from nine countries and 174 tax officials from 10 countries respectively, and plans to expand its influence all the way to Latin American countries including Brazil and Peru this year.

Based on establishing e-tax administrations and providing training courses for developing countries, the NTS looks forward to fostering a better tax environment for Korean companies in foreign markets.

Where more governments are equipped with a digitalized tax administrative system, it will bring about streamlined tax filing and payment processes.

Companies will be able to get tax deductions on business expenditure conveniently, according to the availability of digitalized data.

Such changes will consequently enhance tax certainty in developing countries.

At the moment, the NTS is preparing to go build on what it has achieved to date toward better tax administrative services.

It aims to further improve taxpayer services by integrating innovative technologies which are generally represented by big data and artificial intelligence into the tax administration.

This new journey is not always going to be a straight path.

Having no other best practices we can benchmark, we expect many trial and errors on the way ahead.

Nevertheless, the NTS will continue to take each step at a time as it has done so far.

The global tax communities are paying close attention to this journey.

* Lee Eun-hang is vice commissioner of the National Tax Service.