Questions/Answers

The scale of delinquent taxes had increased each year in Seongnam City so much so that 1 out 4 citizens were delinquent taxpayers by March 2015, and the city wasn’t able to escape the existing standardized collection methods. To resolve this issue, we began to contemplate solutions outside the scope of individual negligence and in terms of the cause of tax delinquency, which led us to the socio-structural issue. As a result, we set “enhancement of citizen confidence in tax payment,” “integration of non-tax receipt management organization,” and “development of differentiated collection method per cause of tax delinquency” as the fundamental solutions. By unifying local tax and non-tax receipt delinquency management through the development of an integrated delinquent tax management organization and integrated computing system, we ensured the accuracy of tax administration data, increased convenience for petitioners, and built citizen confidence. Through the implementation of delinquent tax survey comprised of citizen agents who personally visit the delinquent taxpayers, we provided an opportunity to connect the suffering and neglected delinquent taxpayers to welfare services, job opportunities, etc. leading to sensible tax administration. By building data based on each type of causes behind delinquent taxes through the visiting consultation, we were able to apply a differentiated collection method based on the type of tax delinquency as well as providing a customized tax administration service. These efforts led to the completion of Seongnam City’s own collection system that ensures fair and just taxation. The model of Seongnam City’s collection system isn’t only exclusive to “Seongnam.” In line of the fact that delinquent tax is a chronic issue faced by not only one region but all nations, we wanted to introduce the “warm tax collection system embracing the human” to all nations with the hopes of providing customized systems for each nation.

Although the obligation to pay taxes is one of the top 4 duties of a citizen in accordance with the Constitution, tax delinquency is unfortunately increasing each year and so much so that 1 out of 4 Seongnam citizens was a delinquent taxpayer in March 2015. Seongnam City took the following actions in order to fundamentally resolve the delinquent tax issue. First, due to the continuation of difficult social environment such as recession and unemployment, citizens who have lived ordinary lives as faithful taxpayers were facing financial difficulties and were inevitably being driven to delinquent taxpayers. It was necessary to develop a differentiated method for approaching the delinquent taxpayers which take such social structural issues into account. Second, because non-tax receipts such as negligence penalties, burden charges, and compensations were being separately managed by 87 departments in Seongnam City, it was not only causing inconvenient payment method, but also inefficient data management. With such shortcomings leading to citizens’ distrust in tax administration data, there was a widespread idea that “early taxpayers are the fools,” which led us to plan a project that can change the citizens’ awareness to “taxes must be paid.”

By going beyond the existing collection method that was standardized and dependent on the collection authority of public officials, we proposed an approach that can enable participation of Seongnam citizens in the project so that the citizens themselves can contribute to the solution. Through strategic organizational integration and preparation of systematic foundation that promote citizen convenience, we were able to achieve tax administration innovation. “Seongnam’s Tax Policy Toward Citizen Empathy” that achieved innovation based on such plain and obvious fundamental ideas enabled Seongnam City to become the number 1 welfare city from a city that was most under developed in the 1970s Korea. We selected this project because it is appropriate for the number 2 category as the planning process of Seongnam’s tax policies were not only participated by public officials, but also Seongnam citizens and experts in diverse fields.

We integrated the organization in charge of non-tax receipt and local tax collection task to alleviate the inconvenience of petitioners. And based on complete organization of delinquent tax data, we also converted to a service that is convenient for the petitioners by enabling one-stop payment guide and payment by developing the “Customized and Integrated Delinquent Tax Statistics Management System.” We also applied a humanitarian method of collection by establishing the Delinquent Tax Survey Team comprised of Seongnam citizens, who personally visited delinquent taxpayers to provide consultation and identify the causes of delinquency toward finding resolutions. We were able to alleviate the widespread taxation inequality and relative deprivation across the society by ensuring basic human and constitutional rights for low income delinquent tax payers suffering from neglect through empathetic consultations conducted by citizens and by preparing a foundation for enforcing aggressive collection authority for high income, intentional, and habitual delinquent taxpayers. We improved citizen satisfaction on tax administration by applying a people-oriented collection method that enabled participation from citizens instead of the standardized disposition method that was based on collection from administrative organization with collection authority.

Although the task of delinquent tax collection is a service provided by public institutions with the purpose of increasing public welfare same as other administrative services, it became a subject of government authority rather than a service to the delinquent taxpayers, and furthermore, it became an area of public service that was unwelcomed for the majority of the public who are obviously obligated to pay taxes. It is undeniable that such trend was deeply rooted in citizens’ distrust in tax administration and delinquent tax data managed by the administrative organizations. In order to improve such pessimistic mechanism related to public services, we first innovatively integrated organizations and prepared a hardware foundation such as implementing a data processing system that enables one-stop service and conducting large-scale data maintenance activities. We shifted to the horizontal and empathetic direction by having citizens personally visit and provide consultation for delinquent taxpayers leading to the realization that the taxes paid by the citizens ultimately are used for the citizens. We look forward to spreading positive citizen awareness that “citizens must pay taxes for the good of the citizens” and gradually realizing a national paradigm shift in tax payment.

All 967,510 citizens of the Seongnam City are the direct and indirect beneficiaries of this project. This project was conducted by Seongnam City for 3 years led to visitation of 282,335 households, which is 71% of total households in the city. Such tax administration rooted in the basic principles and continuous promotional activities raised the citizens’ awareness that “even small taxes must be paid.” And with the restoration of confidence in tax administration through maintenance of insufficient data and fair collection stirred up confidence in tax administration. As a result, tax payment became a public obligation and such change in awareness led to tangible results such as increased payment rate before becoming delinquent taxes. Among 282,335 households that were visited, 222 households were able to restore their pride as faithful taxpayers through installment payments and the 179 households were given the opportunity to maintain their livelihood and reenter into the society through direct benefits such as deferral of payments and welfare. We were able to restore their pride as Seongnam citizens who can now proudly enjoy the benefits and basic rights as faithful citizens by escaping the disgrace of being labeled as unfit citizens and delinquent taxpayers.

The “Customized and Integrated Tax Delinquency Statistics Management System” that enables search of local tax/non-tax receipts collection through a single search by combining each department’s server and system into one comprehensive system was established for the first time in the country in order to alleviate inconvenience of petitioners and to resolve the non-systematic taxation/collection/delinquent tax management caused by separate management. Furthermore, through the copyright registration of the system, we were able to not only present a more advanced administration, but also an exemplary model for resolving tax collection. In addition, beyond a coercive and vertical method for the sole purpose of increasing tax revenues where public officials with governmental authority (authority to collect) exercise their power on delinquent taxpayers, “citizens” who can see other citizens eye-to-eye personally visited the delinquent taxpayers to sympathize with their side of the story and contemplate different options. There can be a shift in perception as delinquent taxpayers realize that “taxes from citizens are given back to the citizens” based on their own experience. Because such virtuous cycle can be established through this project, it is an innovative method that seeks solutions for tax delinquency based on the participation of the citizens.

Tax administration that is faithful to the basic principles should be applied to all areas of the society, but in reality, there was a lack of active contemplation on its practical methodology. As such, Seongnam City began its innovative work by converting the tax administration that was geared toward administrative convenience to the perspective of the citizens. The simultaneous contemplation on how to resolve delinquent taxes and ensure fair tax administration gave birth to the “Warm Tax Collection System Embracing the Human.” From the fact that the “development of Integrated Delinquent Tax Collection Management System,” which is the backbone of this project, and the “operation of Delinquent Tax Survey team comprised of citizens” are the first projects of its kind in the nation, they are the results of Seongnam City’s own will toward innovation and research. In particular, the Integrated Delinquent Tax Collection Management System was officially recognized as the first project in Korea by being copyright-registered for two areas by the “Korea Copyright Commission.” We hope the innovation and results that began from a small local organization in Korea can spread out across the nation as well as the world.

This project is the result of “collaborative administration of combining resources from 3-sectors” rooted in the basic principles of “active interest and support from the heads of Seongnam City organizations,” “full budget support from the city council,” and “active project participation from Seongnam citizens.” With the start of an organization comprising 17 public officials in the field of expert tax administration in May 2015, the project was progressed through close communication with the heads of organizations. We expanded and reinforced the number of public officials to 60 members to establish a systematic management system in the area of non-tax receipts, which was divided into 87 sub-departments. In addition, we went through the process of incorporating feedback from experts through continuous collaboration with the researchers from the Korea Institute of Local Finance. But, above all, the key factor that promoted the warm tax collection system was the operation of Petty Delinquent Taxpayer Confirmation Survey Team comprised of citizens. Seongnam citizens totaling 273 man-days participated in the project through public recruitment. As the entire project budget of 4.3 billion won was appropriated by the city itself, it gave birth to a truly innovative citizen participatory model created through private-public resource collaboration.

Yes

“The Warm Tax Collection System Embracing the Human,” which is the backbone of the “Customized and Integrated Tax Delinquency Statistics System,” is being diffused to local governments across the nation. With the completion of copyright registration, 10% of the system’s sales is adding to the tax revenue of Seongnam City. And 9.96 million won in increased tax revenue was achieved through the supply to 4 local government organizations. With the prospect that the system will be supplied to 75 cities and counties, which is 1/3 of all 226 cities and counties in Korea, we expect around 3.1 billion won in new tax revenue in the future. 652 people from 182 cities and counties visited our city between 2016 to 2017 to benchmark our system, which is the largest scale of benchmarking example for a local government organization. Accordingly, each city and county is earnestly developing models appropriate to their environments. The operation of the Delinquent Tax Survey Team comprised of citizens is a “model for citizen participatory delinquent tax activities” and Seongnam’s own collection system is spreading nationwide such as being selected as the key practice toward autonomous decentralization by the Ministry of the Interior and Safety in 2018.

In the current situation, citizens who have lived ordinary lives as faithful taxpayers are facing financial difficulties and are inevitably being driven to delinquent taxpayers due to the continuation of difficult social environment such as recession and unemployment. As such, the paradigm shift from the citizens’ deeply rooted distrust that “early taxpayers are foolish” to “tax payment is a natural duty of citizens” is a challenge that cannot be achieved overnight. We were able to gradually change the public’s perception on tax administration based on systematic preparation and continuous operation of a mechanism that can resolve the issues along with the participation from the citizens through approaching the problems with empathy and from the perspective of the citizens rather than enforcing top-down methods of collection. There is no country free of delinquent taxes, nor will there ever be such times in our life. And from the fact that socially and financially neglected neighbors are always longing for our warm helping hands, the collection system that considers people first must continue its operation and development.

The aim of the Warm Tax Collection System Embracing the Human isn’t simply about collecting delinquent taxes. Through the visiting consultations provided to delinquent Seongnam City taxpayers by the citizens who were able to find employment through the open recruitment for the Delinquent Tax Survey Team, the causes of delinquency were identified and those in need were connected to welfare programs as a way toward ensuring basic living and reentry into the society. On the other hand, the survey citizens prepared a basis for operating aggressive collection authority for the irresponsible habitual delinquent taxpayers. This project proposed a model that can truly provide a comprehensive administrative service based on eradication of unfair tax administration and improvement of confidence in public administration services by converting one-dimensional administration of delinquent tax collection into creation of public jobs, expansion of public welfare service connection, and application of differentiated collection method. As this project converges diverse areas of tax administration such as welfare, taxation, employment, and public sentiment, it is a project with boundless potential.

Yes

The interest in the warm tax collection system embracing the human led to bench marking of 652 people in 182 cities and districts such as the Ministry of the Interior and Safety and Seoul City. Also, the system was reported as the Best Practice at the 5th UCLG World Summit in Bogota, Colombia and as an example at the 6th Smart City Expo World Congress that was held in Barcelona, Spain in November 2016. As a substitute for the official evaluation of each institution, we can mention some examples of awards received. Official recognitions include the Grand Prize at 2016 Gyeonggi Province Best Practice Presentation in the tax revenue category, First Prize at 2016 Korea Institute of Local Finance’s Best Practice in local public finance category, Excellence Award at the 2017 Gyeonggi Province Local Tax Collection Workshop, Excellence Award at the 2017 Local Public Finance Best Practice Presentation, First Prize at the 2017 Ministry of the Interior and Safety Best Challenge Award in the open innovation category, among others.

First, the total tax delinquency of the entire Seongnam City prior to the project implementation was 214.5 billion won in 2015. But, after 3 years of the project, the amount in delinquent taxes has decreased to 78.7 billion won by Dec. 31, 2017, which is a 63.3% reduction at 135.8 billion won compared to 2015. Along with such substantial reductions, the integrated management of causes per delinquency type based on individual consultations performed through personal visitation of 282,335 households, 71% of all households in Seongnam City, enabled the application of differentiated collection method based on the distinction between the low income delinquent taxpayers and the high income/intentional delinquent taxpayers. This ensured fair tax administration and led to the sensible tax administration that integrated welfare solutions beyond the simple collection activities. Such sensible tax administration led to the shift in awareness that “taxes must be paid and the taxes that citizens pay are returned to the citizens through the system called tax administration.” This achievement was evaluated as tax administration innovation that is faithful to the basic principles.

The following were utilized as the standard for quantitative evaluation: the drastic reduction between the carried over delinquent taxes prior to the integration of organizations in charge of delinquent local tax and non-tax receipt in 2015 and the annual carried over delinquent taxes after the integration, the number of consultations provided for delinquent taxpayer households via personal visit through the operation of the Delinquent Taxpayer Survey Team and the following collection results, the survey of phone monitoring evaluation points per visited household, and the survey and results on actual examples of welfare connection. Above all, the evaluation as a model that has the potential for nationwide diffusion was the benchmarking and supply rate of the computing system for the Ministry of the Interior and Safety and other cities and counties.

With the vision grounded in basic principles called “3 (anti-corruption, anti-budget waste, anti-tax evasion) + 1 (spread of public interest) Principle,” this project was planned as a practical project in the area of “anti-tax evasion and spread of public interest.” Based on close communication with the heads of organizations, we expanded and reinforced the number of public officials to 60 members to establish a systematic management system in the area of non-tax receipts. In addition, we set the direction for project promotion and efficient distribution of results through continuous collaboration with the research members of the Korea Institute of Local Finance. But, above all, the key factor that promoted the warm tax collection system was the operation of Petty Delinquent Taxpayer Confirmation Survey Team comprised of citizens. Seongnam citizens totaling 273 man-days participated in the project through public recruitment. Here, to ensure expansion of public interest (ensure fair opportunity), which is a part of Seongnam City’s administration philosophy, the blind interview method for the recruitment was incorporated and provided fair opportunities to everyone. As such, the innovative model for citizen participation was born through private-public collaboration for the first time in Korea.

Although the awareness on the issues of unpaid taxes was a prolonged issue for each local government as well as the country, there were in fact insufficient efforts and results on fundamentally resolving them. We were able to identify that difficulties stemming from the vastness of delinquent tax data, insufficient workforce, weak organizational infrastructure, and above all, citizens’ distrust and reluctance toward tax administration were influenced by external environments. Through continuous visits and promotions by delinquent taxpayer survey agents comprised of citizens, we were able to achieve gradual change in citizens’ awareness. Without such series of processes, change would not have been possible, and we have learned that close private-public collaboration is the only way to fundamentally resolve the issues. Communication is essential for project sustainability as we’ve learned through the 3 years of project promotion. In line with the exhaustion and relative deprivation, due to repetitive visits, expressed by delinquent taxpayers who do not have the means to make payments despite their knowledge of overdue payments, a system of every other year operation is being conducted for overdue payments that are newly carried over to implement tempo control and project sustainability.