SEPT(Simplified e-Tax Payment) SERVICE
Ministry of Security and Public Administration

A. Problem Analysis

 1. What was the problem before the implementation of the initiative?
SEPT(Simplified e-Tax Payment) SERVICE: Integrated payment service available anytime, anywhere, and for all (in Korea) Each local government had in place different payment practices for a list of local taxes and utilities, causing inconveniences for tax payers. ※ There are 244 local governments in Korea, The list of taxes and utilities handled by local governments includes : 11 of local taxes, 2400 non-tax charges. The total number of local tax payments is about 120 million per year Taxpayers mostly went to a bank to pay taxes/utilities with a tax or utility bill. If the bill had been lost or damaged, a taxpayer should have his/her bill re-issued for payment. Banks accepted tax/utility payments only during business hours from 9 am to 4 pm in general; and those who worked between the hours could not make it to pay taxes or utilities before due date, especially the people who live hand to mouth. Most people often turned to automatic cash teller machines(ATM) for their banking tasks, but the machine did not provide services for tax/utility payments. Moreover tax and utility were only payable in a bank located within a jurisdiction of a local government that charged the tax or utility bills, meaning those who lived outside the jurisdiction used to make a travel to pay tax or utility bills. A number of local governments enabled their local citizens to pay their taxes/utilities by credit cards. However, the local governments limit the kinds of acceptable credit cards for tax payment to three or four. The list of allowed credit cards differed depending on regions, causing confusions and inconveniences. Tax payment processing was also costly and inefficient. Local governments—taxation authorities—had to deal with OCR tax forms to process payments, leading to inefficiencies: one to two weeks were taken for the processing; and five to seven public officers were assigned for the job. Also Banks that accept the payment on behalf of the taxation authorities had to manually process tax receipts and send them back to local taxation authorities.

B. Strategic Approach

 2. What was the solution?
Ministry of Security and Public Administration decided to implement a project to address inconveniences caused during tax/utility payments, as a ministry in charge of overseeing local governments’ fiscal policies, including taxation. The project was named as Simplified e-Tax Payment(SETP) that the character “e” stands not only for E-commerce but also for Easy and spEedy payment processes. The name was chosen after a public contest being held to gather opinions from the people how to name the project. The project streamlined and standardized payment practices which had differed between local governments nationwide. The project set up an online payment system which accommodates and connects systems of all local governments and financial institutions relevant to taxation. Tax/utility payments are now processed real time in the single system. In 2009, all local governments, financial institutions and Korea Financial Telecommunications and Clearings Institute signed the standardized contract of entrustment. The contract laid a foundation to streamline and standardize payment practices differing among local governments. From 2010 to 2011, an integrated online system for tax payment/acceptance was introduced connecting relevant systems separately run by all local governments and financial institutions in the past. The system allows running queries on tax imposition data; and processing tax payment/acceptance/counting/allocation on a real time basis. Thanks to system, tax payers can look up a list of taxes/utilities they have to pay, and pay through any means without a paper tax/utility bill; either online banking or at ATM located any nearby bank. The major changes include the followings: -Tax payers fulfill their tax responsibilities either by credit card or bank transfer at any ATM day and night; -Local taxes/utilities are payable through various channels—at a counter or ATM in any bank nationwide, or through online banking; - Not only cash payment, but also payment by credit card of all kinds is available. Tax payers pay by credit card without additional fees, or pay with credit card points as well; and -Taxation authorities or collection agencies can process and confirm payments on a real-time basis upon tax payers’ payment.

 3. How did the initiative solve the problem and improve people’s lives?
For SETP(Simplified e-Tax Payment), a standardized contract was signed between all local governments and financial institutions to entrust the financial institutions to accept tax/utility payments on behalf of the governments. IT system then came in to implement the contract, making tax payment and acceptance possible regardless of time and location. ※ The quantitative benefits of SETP is estimated at 2.7 trillion KRW(2.6 billion USD) savings per year Some countries also provide taxation service through online banking or ATM, but SETP (Simplified e-Tax Payment) is the first of its kind to allow tax payers to look up and pay a list of local taxes and utilities in the single system which allows various payment channels—online, or ATM of all banks nationwide—and various payment options, including credit card of all kinds without additional fees.

C. Execution and Implementation

 4. In which ways is the initiative creative and innovative?
The project is of a massive scale in that government agencies, 244 local governments, and financial institutions—of 22 commercial banks and 14 credit card issuers—should take part in to streamline all items of 11 local tax and 2,400 non-tax charges Given the scale, Ministry of Security and Public Administration has proceeded with the project according to the following stepwise annual plans: In 2009, all local governments, financial institutions and Korea Financial Telecommunications and Clearings Institute signed the standardized contract of entrustment. The contract laid a foundation to streamline and standardize payment practices differing among local governments. From 2010 to 2011, an integrated online system for tax payment/acceptance was introduced connecting relevant systems separately run by all local governments and financial institutions in the past. The system allows running queries on tax imposition data; and processing tax payment/acceptance/counting/allocation on a real time basis. After a pilot run of SETP (Simplified e-Tax Payment) in 2011, the system has been put in place to deal with local taxes since January 2012 as the first phase of the project. Starting from 2013, the system, adding to local taxes, also has covered utilities charged to residents in provinces as the second phase. It is planned the system starts accommodating eight contributions charged for construction permits, parking fines, congestion charges and water/sewage utilities from 2014 as the third phase.

 5. Who implemented the initiative and what is the size of the population affected by this initiative?
Ministry of Security and Public Administration has assumed a leading role to prepare for and implement SETP (Simplified e-Tax Payment). The ministry drew up the project plan, brought together relevant organizations, adjusted rules and regulations and formed a task force team for the project. Local governments has also been active players to introduce SETP (Simplified e-Tax Payment) signing the entrustment contract; taking a part in the task force team; and joining forces to improve and integrate online systems for SETP (Simplified e-Tax Payment). Cooperation from financial institutions—banks and credit card issuers alike—is a must for the success of SETP (Simplified e-Tax Payment). The financial institutions join the task force team; collaborate to enhance and integrate relevant online systems; and promotes SETP (Simplified e-Tax Payment) service among their customers. Credit card issuers, in particular, agree to allow tax payment by credit card, and credit card points to be used for the paymen
 6. How was the strategy implemented and what resources were mobilized?
The Korean government invested a total of 9.22 billion KRW (876.4 million USD) for the project: 4.29 billion, for the first phase; 2.84 billion, for the second phase; and 2.09 billion up for the third phase scheduled in 2014. The project did not replace all existing online systems; rather connected them all to set up the integrated system, minimizing additional investment. The list of systems integrated includes online payment system for local taxes, information system on local taxes, information system on non-tax local revenues, online systems of financial institutions. Thanks to the strategy, SETP (Simplified e-Tax Payment) Project is proceeded with least investment possible. The project has taken advantage of public-private partnership under which Ministry of Security and Public Administration, local governments and financial institutions join forces to set up the task force team for SETP (Simplified e-Tax Payment)Project. The partnership indeed was effective and efficient in addressing issues promptly during the project.

 7. Who were the stakeholders involved in the design of the initiative and in its implementation?
Payment practices of all local governments are standardized by signing the entrustment contract between the local governments, financial institutions, Korea Financial Telecommunications and Clearings Institute. The contract lays a foundation for all local governments to provide tax payment service through common medium. Information on taxes/utilities imposition by local governments can be managed in the single system as well. The information system set up under SETP(Simplified e-Tax Payment) enables real-time inquiries on taxes/utilities data; and process taxes/utilities payment and acceptance, tax counting and allocation all in the single system. Thanks to the system, tax payers can look into the list of taxes/utilities that they have to pay; pay and confirm them in any bank regardless of location and time. Taxation authorities, in the meantime, count and allocate taxes/utilities amounts through the system. Now that tax payers can pay taxes through any convenient way available for them—at a counter or ATM in any bank and online; and they can pay with cash, credit card, or credit card rewards, it becomes handier than ever for tax payers to meet their citizenship responsibility. Another advantage of SETP (Simplified e-Tax Payment) is that OCR tax forms are eliminated, dramatically cutting administrative costs of processing the forms. Tax payers can turn to online banking, ATM or a bank counter, without the OCR form, to pay taxes/utilities. Upon the payment, taxation authorities can confirm the payment through the SETP (Simplified e-Tax Payment) system on a real-time basis.

 8. What were the most successful outputs and why was the initiative effective?
The task force team was set up bringing together people from Ministry of Security and Public Administration, local governments and financial institutions to monitor project progresses. Project Management Office, or PMO, has been in place, overseeing the SETP (Simplified e-Tax Payment) system as well as overall risk management and regulation compliance from the start through to the end of the project. Performance has been measured upon the completion of each phase of the project; and the results of each phase are reflected in the following phase. Thanks to the performance measurement and feedback, the project has been proceeded with effectively.

 9. What were the main obstacles encountered and how were they overcome?
It was difficult to bring together all relevant organizations—local governments (224), commercial banks (22), credit card issuers (14) and Korea Financial Telecommunications and Clearings Institute—for SETP (Simplified e-Tax Payment) Project. Given that collaboration between the organizations is a must for the success of the project, Ministry of Security and Public Administration held seminars to promote the project, and made all-out efforts to convince the relevant organizations the importance of their supports and collaboration. SETP (Simplified e-Tax Payment) was little known to the public; and there were concerns that tax payers might be puzzled if the system replaced all previous tax payment practices all at once. However such confusion among the public stood at a contrast to the project’s original intention. To prevent possible confusions, previous tax payment practices based on OCR tax forms ran in parallel with SETP (Simplified e-Tax Payment) for a period of time. In the meantime, SETP (Simplified e-Tax Payment) was promoted to help tax payers be accustomed to the new payment system.

D. Impact and Sustainability

 10. What were the key benefits resulting from this initiative?
The initiative enables higher quality administrative service: tax payers can pay taxes/utilities all at once through any means most convenient for them at any time in any place; and they don’t have to keep tax receipts after the payment unlike before Taxes and utilities can be paid through various channels regardless of time and location. Those who live hand to mouth had difficulties going to bank during business hours before the introduction of SETP (Simplified e-Tax Payment), often missing due date. Now it is their choice when to make the payment. On the other hand, the elderly who are not familiar with online system can opt for a different channel for payment. SETP (Simplified e-Tax Payment) also enhances work efficiency of taxation authorities and banks. The authorities and banks can process tax payment real time with no need to keeping a huge amount of tax receipts, leading to less processing time and human resources required. SETP (Simplified e-Tax Payment) system requires less human and other resources. Companies, local governments and financial institutions put fewer workforces in place for tax related tasks; and utilize remaining workforces for more productive or profitable tasks. That contributes to efficient resources usage, which, in turn, leads to higher competitiveness of all those organizations. SETP (Simplified e-Tax Payment) is estimated to cut cost of about 2.7 trillion KRW(2.6 billion USD) per year. Transportation cost or waiting hours on tax payers’ front are saved, which is estimated to be worth about 1.7 trillion KRW per year. Local governments, or collection agencies, are expected to save about 1.2 trillion KRW every year by cutting cost of manually processing tax/utility payments, keeping or mailing a tax/utility bills. Financial institutions, too, spend fewer resources for tax/utility bills acceptance, which is translated into 400 billion KRW in savings. Tax payers can check payment processing real-time, preventing corruptive practices and improving transparency in regards to tax or utility payment/acceptance. It contributes to building trust among the citizens in administrative service of local tax authorities

 11. Did the initiative improve integrity and/or accountability in public service? (If applicable)
The Korean government, based on public-private partnership and advanced information technologies, has set up most convenient and efficient tax payment system: SEPT(Simplified e-Tax Payment). The Korean government amended Local Tax Act and Decree (December, 2010) to guarantee Sustainability and plans to advance SEPT(Simplified e-Tax Payment) further by integrating other features such as tax payment through smart phones to improve tax payment service for better. Many nations around the world have made efforts to provide more convenience for tax payers by providing administrative services online. Rapid development of information technology has accelerated such a shift to online. SETP (Simplified e-Tax Payment) can be an excellence reference case for other nations that look for ways to make tax payment handier for their citizens as well as enhance efficiencies of administrative services. Any country can refer to SETP (Simplified e-Tax Payment) and consider introducing the system in the country

 12. Were special measures put in place to ensure that the initiative benefits women and girls and improves the situation of the poorest and most vulnerable? (If applicable)
The SETP (Simplified e-Tax Payment) project looks at existing tax payment practices from tax payers’ perspectives, addressing inconveniences facing them and improving service quality. With the cause of serving the public with better administrative service, investment and cooperation from the private sector were successfully secured. Meanwhile, in order to minimize confusions among the public due to the new system, the government ran a pilot project; adopted a phased implementation of the new system; and promoted the project to help tax payers be accustomed to the system. Such efforts are also part of the success story. SETP (Simplified e-Tax Payment) has been in place successfully thanks to joint efforts made by the public and private sectors. The efforts have paid off, enhancing administrative service for the public and work efficiencies of government agencies. However, it is premature to celebrate the success; rather the government should prepare for unexpected errors, and reflect feedback from users and public to further develop SETP (Simplified e-Tax Payment) into more reliable system.

Contact Information

Institution Name:   Ministry of Security and Public Administration
Institution Type:   Government Department  
Contact Person:   Yoo - Kun Jung
Title:   deputy director  
Telephone/ Fax:   82-2-2100-5985 / 82-2-2100-4313
Institution's / Project's Website:  
Address:   209 Sejong-daero
Postal Code:   110-760
City:   Jongno-gu
State/Province:   Seoul

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