＜Abstract＞
 

Legislative Proposal for New Taxation Method of Exit Tax to Improve Taxation Efficiency

Ahn, Sung Hee
 

This comparative study analyzes legislation in major countries and reviews existing literature to propose legislative improvements to prior to its imple- mentation that would secure the domestic authority to impose taxes. The characteristics of the Exit Tax in terms of tax law are also summarized in this study.

From the perspective of equity, efficiency, and clarity of taxation, the Exit Tax system as currently enacted is not sufficient to achieve the legislative purpose of securing the authority of taxation, in comparison to the compilation and tax collection costs incurred. It is also problematic that newly legislated regulation seriously encroaches upon the efficiency of taxation through its provisions on taxation of unrealized profit.

In view of these issues, the current law proposes legislative amendments towards the efficient securing of the domestic authority of taxation within the current legal framework. Furthermore, legislative improvement is suggested in response to the deferred payment, credit adjustment, and tax return upon re-immigration provisions that were legislated in response to unrealized profit, and which gravely disrupt the efficiency of taxation.

First, for taxpayers, the residency requirement must be changed from 10 years before the expatriate transfer to the domicile or the residence period of the residence exceeds 5 years. Include income requirements and increase the range of taxpayers who are obliged to transfer capital income tax to non-residents. In addition, the status of a non-resident in accordance with the tax laws should be made possible only when report the exit tax and payment (deferred payment) is made.

Second, all taxable assets are subject to taxation, except for assets with domestic taxable income. When calculating the tax base, it is necessary to calculate the transfer value at the time of departure and the applicable tax rate should be the same as the income tax law.

Third, deferred payment period is not limited to five years but it is obligatory to report major matters during deferred payment. It is reasonable to allow adjustment deductions with a limited time limit and to adjust the acquisition value instead of reimbursing at the time of re-entry.

Fourth, when payment is made, foreign revere tax credit system is excluded, domestic taxation relationship must be concluded.

However, there is a limit to improve the efficiency of taxation under system of existing law, which is subject to the same taxation despite the fact that the duty of taxation is extinguished depending on whether the payment is suspended or the final taxation authority is changed. As a final proposal, this article propose that the new taxation forms vary depending on whether or not payment is delayed.

If the tax payment obligation is extinguished by the payment, it is reasonable that the exit country terminates the taxation relationship and transfer country exercise taxation only the value increase after the transfer from the previous country is valid.

In the case where the payment is delayed, in which exiting country exercise final taxation, and tax treaties are concluded accordingly. To guarantee the final taxation right of the exiting country with regard to tax postponement, it will also be necessary to include the gains from assets subject to the Exit Tax to the non-resident’s scope of tax obligation, the period of exemption from the national tax shall be revised. In addition, it will be crucial to impose a tax on the assets that are under the deferred payment and subject to the Exit Tax at the same rate as the Exit Tax.

This article is expected to contribute to more efficient securing of domestic taxation authority and to a more reasonable taxation system leading into the implementation of the Exit Tax.

▶ Key Words：efficiency of taxation, securing of taxation rights, unrealized profits, deferred payment, transfer country, increase in value after transfer, exiting country, exercise of final taxation authority

** Published on August 2017
** Full article available in Korean only
** Download here →12-1 Legislative Proposal for New Taxation Method of.pdf