Korean Tax Service Will Reduce Business Audits

by Mary Swire, Tax-News.com, Hong Kong

24 May 2004

The Korean National Tax Service is to scale back the number of audits carried out on firms in order to ease the compliance burden on business, NTS Commissioner Lee Yong-sup revealed last Friday.

The tax department chief told business representatives at a Federation of Korean Industries speech that the NTS will aim to audit 1.5% of all registered firms this year, down from the usual rate of 2%.

Lee also confirmed that this more lenient approach will apply to small and medium-sized firms, 1.3% of which will be audited this year, down from the 1.7% examined last year, as part of a new strategy by the NTS focusing on the timely and accurate reporting of taxable income rather than finding and punishing tax discrepancies.

The new policy is also to include foreign firms, as Lee announced in a speech to the American Chamber of Commerce in Korea last year:

"The NTS would not initiate tax investigations into foreign companies unless there is a clear indication of their tax evasion using transfer pricing manipulation," he informed the delegates.

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