(EDITORIAL from the Korea Herald on July 11)

Tax office reform

Shortly after his designation as commissioner of the National Tax Service and
during his confirmation hearing this week, Baek Yong-ho repeatedly said that the
tax office should not be a "power-wielding agency." Nor should it be treated as
such, he said.

His remarks could not have been more appropriate. The tax office's main job is to
levy taxes, whose revenues constitute the lion's share of the funding for
government programs. It also conducts tax audits on individual and corporate
taxpayers.
Unfortunately, there is no denying that almost all presidents, including those
democratically elected, have often used the tax office as a tool for controlling
their political opponents. It has been anything but unusual for an incumbent
president out of vengeance to order a tax audit on businesses close to his
erstwhile rivals. No less shameful is its history of pressuring businesses to
make illegal donations to the president or his party.
No wonder the tax office has been counted among the four most powerful government
agencies in the nation, together with the National Intelligence Service, the
prosecutor's office and the national police agency. The posts of these agencies
have been filled by some of those most trusted by the president.
Baek, an economist-turned technocrat, is no exception in this regard. He is one
of President Lee Myung-bak's closest confidantes. When Lee was Seoul mayor, Baek
assisted him in developing policy as head of the metropolitan government's think
tank. He advised Lee on policy issues during the presidential campaign. Later, he
was rewarded with the post of chairman of the Fair Trade Commission.
But it is refreshing to hear him say the National Tax Office should overcome its
ungainly image as a power-wielding agency and that it should make itself over as
an office of tax administration held in high esteem by taxpayers. By making these
remarks, he is virtually committing himself to making the tax office politically
neutral and promising not to leave it at the president's beck and call.
As he said, it is desirable to conduct regular tax audits on large business
enterprises - once in every four or five years. An arbitrary tax audit may be
construed (or misconstrued) as being politically motivated. "Taxpayer resistance
often results from (inordinate) tax audits," he said. "I believe corporations
will put up little resistance if given an advance signal that their books will be
audited this time around."
Ensuring political neutrality is only half the mission he will have to accomplish
as new head of the tax office. The other half is to make tax administration so
transparent as to leave little room for corruption. This should be a Herculean
task, given that the tax office has been a hotbed of corruption.
Of the 16 former heads of the tax office, as many as seven were sent to prison
for taking bribes and/or breaching the political funding law. In addition, Baek's
immediate predecessor has not yet been completely cleared of bribery charges.
Brought in from the outside, Baek may be better positioned to push ahead with
reform than a commissioner selected from among the insiders whose collective
reputation is often called into question. Moreover, he is not beholden to any
business enterprise.
It may take time to overhaul the National Tax Service for a drastic improvement
to the corruption-tainted tax administration. As President Lee said on picking
Baek for the post of tax commissioner, all parties concerned will have to consult
on renewing the tax administration to the fullest extent possible before making a
final decision on the reform.
As part of the reform, the Lee administration is advised to create a watchdog
patterned after the IRS Oversight Board of the United States - an independent
agency charged to oversee overall tax administration.
(END)