World Bank-Korea Development Forum

The International Tax Conference for Development and Growth was held on June 4th to 5th, 2015 at Westin Chosun Hotel, Seoul as a side event of the Korea Week 2015. The conference was jointly hosted and organized by the Ministry of Strategy and Finance, the World bank Group and the KDI School of Public Policy and Management. The background of the conference goes back to the global economic crisis in 2008. Low economic growth had made it difficult for most economies to rebuild budget surplus and reduce the level of debt accumulated during the crisis. Policy makers came together to design a tax system to support investment spending, restore economic growth and mobilize enough tax revenue to meet government spending at the same time.

The event was designed to inform policy makers the latest thinking in terms of tax policy and administration and provide opportunity to share other countries’ experiences. The Tax Conference was officially opened and attended by high level dignitaries: Chang-yong Moon, Deputy Minister, Tax and Customs, Ministry of Strategy and Finance and Joon-Kyung Kim, President, Korea Development Institute(KDI) and James A. Brumby, Director, Governance GP, World Bank. The first session started with a presentation on Domestic Resource Mobilization (DRM) Agenda on Finance for Development and growth. Richard Stern, Lead Tax Officer, World Bank, pointed out that although revenue collection in developing countries have tripled past years, they are still below the level needed (less than 15 %/GDP) in most cases. He noted that official development assistance for tax support and reform remains low that it is necessary to put DRM into the context of the entire economy considering tradeoffs between equity, efficiency, need of raise revenues and the political economy.

The second session focused on tax reforms for fiscal stability and sustainable growth. Michael Thackray, Technical Assistant Advisor of IMF, highlighted that overall fiscal outlook suggests continued yet moderate consolidation, against significant risks. Fiscal risks remain elevated but the context is favorable to implementing lasting fiscal reforms. He continued that fiscal policy plays an essential role in building confidence and sustaining aggregate demand.

The third session featured Korea’s tax policy: from resilience to breakthrough. Yoonjin Kang, Director International Tax Division, Ministry of Strategy and Finance explained how Korean economy has achieved a remarkable success over the past half–century, and how the fiscal soundness resulting from increased revenue was due to broader tax base through the introduction of advanced tax scheme such as “Global Income Tax System” and “Credit-Based Income Deduction System.”

The last session concluded with international tax issues. Richard Parry, Head of Global Relations Divisions, Center for Tax Policy and Administration, OECD, explained the Base Erosion & Profit Shifting (B.E.P.S.) and Exchange of Information in detailed. He encouraged to engage with partner economies through B.E.P.S. project.

The second day agenda was; learning from Countries experience. Vietnam, Philippines, Malaysia, Mongolia, Laos, Myanmar, Thailand, and Korea shared their experiences of each country presented detailed various reforms which contribute to supporting the economic sustainable growth by the taxation policy. They also shared international tax principles in relation to country conditions, and ways of reducing the shadow of economy. Hyung Chul Lee, senior public sector specialist, WB, introduced a mandatory electronic tax invoice (ETI) to enhance transparency of business transactions and to lower tax compliance costs. The launch of “e-zero”, ETI issuing web site, and telephone ARS for ETI issuing plus other initiative made the ETI adoption rate in terms of value to reach 99.9 % in 2013 which recorded 15 % jump before the mandatory ETI.

On “Moving Forward/Strengthening Regional Collaboration on Tax Matters”, Richard Stern elaborated how CIAT was created to render an integral service for the modernization of the Tax administrations of its member countries, promoting evolution, social acceptance and institutional strengthening. Their mission is to promote an environment for mutual collaboration and to provide a forum to promote exchange of experiences among its 38 member countries, assisting them in improving their tax administrations based upon each country''s needs expressed by them.

Richard Parry, Head of the Global Relations Division, OECD, emphasized on the strengthening regional international collaboration on taxes. He further stressed on the importance of shared and good practice in taxation and the importance of working together to identify synergies and avoid duplication of efforts in respect of existing activities on tax matters.

By Leah Chepkoske Waweru (2014 MDP, Kenya)