Government to Change Tax Policy Mid- to Long-Term Strategy to Be Established Every 5 Years

[Asia Economy Reporter Kwangho Lee] The government is pushing to change the 'Mid- to Long-term Tax Policy Operation Plan,' which currently announces a basic plan every year, to a 5-year plan. However, a proviso was added that allows for re-establishment within a period of up to 5 years if necessary.

According to the government on the 27th, the Ministry of Economy and Finance recently included a revision bill of the Framework Act on National Taxes with this content as the main point in the '2020 Tax Law Amendment Proposal.'

The Mid- to Long-term Tax Policy Operation Plan contains the basic direction and goals of tax policy for the next 5 years and is submitted to the National Assembly along with the government budget proposal. It was introduced in 2013 following criticism that, unlike the fiscal expenditure sector, there was no mid- to long-term plan for fiscal revenue.

The government decided to prepare a mid- to long-term evaluation and analysis report annually instead of drafting the Mid- to Long-term Tax Policy Operation Plan every 5 years. The report will include ▲ the operation status of major tax items ▲ the operation status of tax exemptions and reductions ▲ any changes or factors requiring modification of the mid- to long-term plan.

The government's push to amend the tax law with this content reflects criticism that the annually submitted Mid- to Long-term Tax Policy Operation Plan had at some point become a 'plan in name only.'

The government has also been criticized for focusing tax policy mainly on tax reform proposals that attract public interest, while repeatedly including similar content in the mid- to long-term plan every year and neglecting to present a clear tax policy vision.

Since there has been no retrospective performance review or evaluation procedure for the goals and directions included in the mid- to long-term plan, many previously announced tasks have remained unresolved.

The Ministry of Economy and Finance stated, "To enhance the consistency and effectiveness of mid- to long-term tax policy, we decided to change the plan establishment cycle from 1 year to 5 years and instead introduce an evaluation and analysis report as part of the tax law amendment. If the bill passes as proposed by the government, it will be applied starting next year."