Questions/Answers

Korea was hit hard by the financial crisis of 1997 and the collapse of Lehman Brothers in 2008, which intensified economic inequality. Now, the global spread of COVID-19 in 2020 is aggravating the economy at home and abroad. The UN Department of Economic and Social Affairs (DESA) attributes the deteriorating economic situation triggered by the coronavirus to the global gap between the rich and the poor, drawing concern about its impact on economically vulnerable people. Taxes provide a nation with the funds it needs to operate. The government collects taxes from the private sector to use for the public sector, distributing resources and redistributing income. In this respect, taxes play an important role in reducing economic inequality. To address the current issue, Gyeonggi Province publicly announced “tax justice for a fair world” as its policy goal and renamed the tax department as the “Tax Justice Department.” The goal of this program is three-fold. First, it aims to take strict enforcement actions to collect back taxes from major and chronic tax delinquents by all means, even criminal punishment, sending a warning to society. Second, it aims to take customized tax collection actions to collect back taxes from delinquent taxpayers whose tax debts are not large by having a group of citizen tax counselors visit delinquent taxpayers and provide them with customized services depending upon their economic situations. Last but not least, this program aims to create a system, invest funds, and develop new tax collection techniques to ultimately build a sustainable legal and institutional system.

This program aims to contribute to the enhancement of public institution effectiveness in achieving the sustainable development goals. Gyeonggi Province’s policy goal is to create “a fair world through tax justice.” The province worked together with its 31 local governments to create the Gyeonggi Province Tax Arrears Taskforce and holds monthly meetings and a yearly research competition to review achievements and develop new techniques. Also, the province published a manual, registered patents, and developed a computerized system to disseminate new tax collection techniques and achieve its goals.

This program supports UN Sustainable Development Goals No. 10 and No.16. It aims to create a fair world through tax justice and, to that end, continues to revisit and evaluate its performance. In relation to SDG No. 10, this program works to develop new techniques for collecting back taxes from chronic tax delinquents, while providing customized services to financially vulnerable tax debtors, ultimately reducing economic inequality and creating a fair world. In relation to SDG No. 16, Korea consists of three governmental organizations: the central government, metropolitan governments, and local authorities. Gyeonggi Province has organized a body for effective back tax collection in partnership with its 31 cities and counties, provided financial support for the development of new tax collection techniques, and created an ideal system, both legally and institutionally, that is not only sustainable but also applicable to any society.

This program is designed to create a fair society through effective tax collection. A fair society creates a sustainable environment in which citizens pay their taxes faithfully. Gyeonggi Province takes enforced collection actions to publicly warn that tax delinquents will be punished while tax debtors who are economically vulnerable and cannot afford to pay taxes will be provided with an opportunity to pay their back taxes. This program contributes to imbuing individual citizens with a sense of responsibility as members of society and maintaining the sustainability of society by providing financially vulnerable people with fair opportunities to fulfill their responsibilities.

The Korean government consists of the central government, metropolitan governments, and local authorities. As a metropolitan government, Gyeonggi Province give its cities and counties the authority to levy and collect taxes, but they have difficulties fulfilling such duties due to a lack of human and financial resources. To address this problem, Gyeonggi Province organized the 76-member-strong Gyeonggi Province Tax Arrears Taskforce in partnership with its 31 cities and counties. It also recruited 2,000 citizens to survey the economic situations of over two million tax delinquents. The taskforce held monthly meetings and best practice presentations to develop innovative tax collection systems and techniques, and created a system to ensure the sustainability of its efforts. As a result, Gyeonggi Province visited and searched the homes of chronic tax delinquents as part of its enforcement collection actions, while it recruited 2,000 citizens as counselors who visited some 1,400 financially vulnerable tax delinquents to provide them with customized services, such as welfare benefits and jobs.

Women account for roughly 30 percent of tax delinquents. Since women most often are the ones who take care of their children at home, members of the Gyeonggi Province Tax Arrears Taskforce, consisting of public officials and citizens, are likely to encounter them at their homes without their husbands. To avoid making women feel intimidated, Gyeonggi Province decided that 30 percent of the public officials on the taskforce would be women, as would 70 percent of the citizens on the taskforce. In doing so, Gyeonggi Province contributed to creating jobs for women, who often experience difficulty in joining the workforce.

The Gyeonggi Province Tax Justice Program benefits everyone involved, including financially vulnerable tax delinquents and the province itself, which grants the authority to levy and collect taxes to its cities and counties, which need human and financial resources. Moreover, the program contributes to creating a fair society in partnership with the people. Gyeonggi Province created the program for efficient tax collection in partnership with its 31 local governments. It provided the cities and the Gyeonggi Province Tax Arrears Taskforce with financial and human resources, held meetings every month to review taskforce performance, and developed new tax collection techniques. This partnership enhanced the capacity of the province and the local governments to collect taxes. Gyeonggi Province also recruited over 2,000 citizen counselors and tasked them with visiting financially vulnerable tax delinquents and providing them with customized services. Especially, the counselors introduced welfare services, job openings, and financial loan institutions to help them recover their financial situations. This program has contributed to achieving Gyeonggi Province’s goal of creating a “fair world through tax justice.” According to a survey of 1,000 residents in Gyeonggi Province conducted by a public opinion polling firm, 88 percent of those surveyed responded positively to the program.

In 2014, the national economy deteriorated, causing the number of major and chronic tax delinquents to increase. To resolve the problem, Gyeonggi Province created a tax collection department to achieve “tax justice for a fair world.” The province also launched the Gyeonggi Province Tax Arrears Taskforce, consisting of 76 public officials, in partnership with the 31 cities and counties of the province. In 2018, Gyeonggi Province expanded the Tax Collection Department and renamed it as the “Tax Justice Department.” Since 2019, the province has recruited over 2,000 citizens to survey the economic situations of tax delinquents. Gyeonggi Province and its 31 cities and counties cooperated in taking enforcement actions to collect taxes from major and chronic tax delinquents, on the one hand, and in surveying the economic conditions of financially vulnerable tax delinquents as well as helping them pay their taxes by introducing welfare services and jobs. A total of 1,421 poor tax debtors have received customized services as of 2020. Gyeonggi Province and its 31 cities and counties held monthly meetings to review the activities of the Gyeonggi Province Tax Arrears Taskforce and develop new tax collection techniques. They also held a best practice presentation every year. The Gyeonggi Province Tax Justice Program was named a “creative and sustainable program” through the Budget-saving Incentive Operation Evaluation held by Gyeonggi Province in 2020. Also, the Gyeonggi Research Institute, in a report released in May 2020, praised the program for its effectiveness in collecting back taxes and improving work efficiency through partnerships with local governments. A survey of 1,000 people living in Gyeonggi Province conducted by a public opinion polling institution showed that respondents highly valued the program and suggested that Gyeonggi Province expand the legal and institutional power of the Gyeonggi Tax Arrears Taskforce and increase partnerships with local governments.

This program focuses on developing new tax collection through cooperation and communication with local governments, a process fraught with many difficulties. To overcome these difficulties, Gyeonggi Province held monthly meetings to revisit the program and develop new tax collection techniques. The province also held best practice presentations and shared outstanding examples. Such efforts laid the foundation for the sustainability and success of the program by identifying and predicting problems.

The system through which metropolitan governments delegate authority to local governments to levy and collect taxes has been maintained for 70 years. This delegation of taxing power was accompanied by many problems, such as a lack of financial and human resources as well as technological problems. With the adoption of this program, however, Gyeonggi Province and its cities and counties managed to achieve their goal of tax justice through practical partnerships. Especially, the province has taken firm action on chronic tax delinquency by applying new tax collection techniques, while providing poor tax delinquents with customized welfare services and jobs.

This program is the first of its kind to be implemented in Korea. Gyeonggi Province visited leading cities of advanced nations, including the United States, Canada, and European nations, to benchmark successful tax collection programs and study their taxation systems. There have been many reports on tax-related systems from other nations, but the Gyeonggi Province Tax Justice Program is truly unprecedented and innovative.

Gyeonggi Province carried out R&D activities to develop new tax collection techniques in partnership with its 31 cities and counties. Among the many outcomes, the “Tax Delinquents’ Securities Seizure System” and “Lease Deposit Electronic Seizure System” were granted patents by the Korean Intellectual Property Office. The former is a technology used to electronically seize the financial assets of tax delinquents, such as stocks and funds. The system drastically reduced the time needed to investigate and collect financial assets from six months to five days.

The Gyeonggi Province Tax Justice Program has been benchmarked by all 17 metropolitan governments of Korea. Especially, Gwangju City, Jeju Province, and South Chungcheong Province implemented their own tax arrears taskforces and tax collection techniques with the help of Gyeonggi Province. Gwangju City recruited 20 public officials and 80 citizens to launch its Back Tax Collection Team on March 12, 2019. Jeju Province also organized the Jeju Back Tax Management Team, consisting of five tax collection experts and 33 citizens and modeled after the Gyeonggi Province Tax Arrears Taskforce, on March 7, 2019. As a result, Jeju Province succeeded in collecting KRW 5.1 billion in unpaid taxes and analyzed its performance at the Jeju Back Tax Management Team Evaluation Meeting on December 18, 2019. South Chungcheong Province also created its Back Tax Investigation Team in March 2019. Having achieved successful results, the three provinces continue to operate their tax collection teams.

This program is the first of its kind in Korea and has been benchmarked by four metropolitan governments in the country. Gyeonggi Province monitors the tax collection systems of advanced nations every year, but they show no similarity to the Gyeonggi Province Tax Justice Program. Gyeonggi Province created this program in cooperation with its cities and counties and held monthly meetings to review the program and develop new tax collection methods for them to use. Cooperation and communication among local governments are essential for the implementation of this program. As most of the program budget is allocated for the general public, the program contributes to creating jobs. Meetings and R&D activities for cooperation among local governments enhance the program even further by enabling the sharing of information. In this respect, this program has great potential for transferability as long as there is a desire to create a fair world through tax justice.

The budget allotted to the 31 cities and counties for this project is KRW 19.2 billion, including KRW 2.3 billion for tax collection activities and KRW 11.5 billion for the recruitment of citizen counselors. Most of the budget goes to labor costs. The human resources involved in this program include 76 members of the Gyeonggi Province Tax Arrears Taskforce, who are public officials responsible for tax collection, and over 2,000 citizen counselors. The office, supplies and equipment, including computers, for the program were already available and thus did not need to be prepared anew.

Labor costs make up the majority of this program’s budget, and the payment of labor costs requires public agreement. A survey showed that the majority of people responded positively to this program and hope that it will be sustainable. It is likely to continue enjoying public support if it takes social minorities and women into account when recruiting human resources. In addition, the program is sustainable because Gyeonggi Province and its cities and counties hold monthly meetings to evaluate the effects of the program, draw up future plans, and develop new tax collection methods.

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Gyeonggi Province’s “Budget-saving Incentive Operation Evaluation” was evaluated three times: by the working-level department, by the Director General for Policy Planning Screening Committee, and then by the Gyeonggi Province Screening Committee based on the Local Finance Act. As a result, the Gyeonggi Province Tax Arrears Taskforce received the highest scores on evaluation criteria for creativity, effort, and ripple effects, and won the largest cash prize. Also, patents for the two taskforce inventions were finally granted after many meetings and verifications of their conformance with the rigid standards of the Korean Intellectual Property Office over a period of two years.

The three evaluation indicators of the “Budget-saving Incentive Operation Evaluation” include creativity, effort, and ripple effects, each of which are divided into four levels (excellent, good, average, and below average). “Creativity” evaluates the originality of the methods of discovering sources of tax revenue, while “effort” assesses the originality of the new sources. “Ripple effects” reviews the impact of the methods on other local governments. The two inventions were patented after a rigid evaluation in 10 areas, including technology, background technology, and effect of the invention, by the Korean Intellectual Property Office.

The Gyeonggi Province Tax Justice Program received the highest rating, “excellent,” on the Budget-saving Incentive Operation Evaluation in three areas: creativity, effort, and ripple effects. In terms of “creativity,” the program is the first of its kind in Korea and contributed significantly to increasing public revenue. It also solved many problems in close cooperation with local governments throughout the province. In the “effort” area, the program achieved outstanding results by putting innovative ideas into action. As for “ripple effects,” the program was disseminated to 16 metropolitan governments and 243 local governments across the nation. Among them, four metropolitan governments acknowledged the excellent effects of the program. The two patented tax collection methods received excellent scores on the 10 evaluation standards and have been adopted by the central government to be used by all local governments. This program was named a best practice through the Budget-saving Incentive Operation Evaluation held in April 2020. Also, Gyeonggi Province and its 31 cities and counties invented the Lease Deposit Electronic Seizure System, and obtained a patent from the Korean Intellectual Property Office. In 2017, it won the Interior and Safety Minister’s Prize in the Central Government Outstanding Ideas Awards. The Tax Delinquents’ Securities Seizure System was also patented.

This program serves as a good example of efficient partnerships between metropolitan governments and local governments in collecting taxes through the delegation of powers. Gyeonggi Province provides local governments with financial and human resources, holds monthly meetings to analyze problems, develop new tax collection methods, and ultimately build an efficient tax collection system. As the sustainability of public policy lies in support from the people, this program draws positive responses from citizens in terms of its necessity, according to surveys. Also, the central government is planning to disseminate the program across the nation, with four metropolitan governments having acknowledged the effectiveness of the program in collecting taxes.

In July 2012, Gyeonggi Province created the Gyeonggi Province Tax Arrears Taskforce by dividing its 31 cities and counties into eight zones and recruiting two public officials from each city to collect taxes, as the number of tax delinquents had increased along with real estate market stagnation and a long-term economic depression. In other words, Gyeonggi Province improved its tax collection policy by pursuing collaborative governance rather than tightening its authority over tax collection. Since 2018, Gyeonggi Province has expanded the taskforce by increasing the number of members from five to seven. It also subdivided each zone into four and further expanded the taskforce to 76 members in total. It installed an office in each zone to enhance accessibility and efficiency and facilitate communication between the metropolitan government and local governments. In addition, it improved its tax collection capacity by holding monthly meetings to share relevant information and study the latest precedents.

Gyeonggi Province aims to create “a fair world through tax justice.” The Gyeonggi Province Tax Justice Program has contributed to reducing economic inequality in the area of tax collection, which required the strengthening of enforcement actions to collect taxes from chronic tax delinquents while providing those in financial trouble with the opportunity to recover. It is especially noteworthy that efficient and practical collaboration between the metropolitan government and local governments is vital for the success of this program and that Gyeonggi Province worked closely with its cities and counties to overcome difficulties and develop new tax collection methods. Despite the efforts Gyeonggi Province has made, however, there is still deep-seated public distrust of tax collection practices in Korea. To realize tax justice, aggressive support from the central government is essential. It is encouraging that the central government is now paying attention to this program, as ensuring the sustainability of good policies is the key to securing public trust in tax policy.