The Introduction of the Open Tax Court
The Seoul Metropolitan Government (SMG) has been in the forefront of implementing an innovative tax system and has actively capitalized on available commercial solutions to develop its infrastructure. The SMG has also launched the ‘Open Tax Court’ in an effort to transform the review process of tax-related petitions by taking into account the viewpoints of the citizens.
The Open Tax Court attempts to reduce the distrust and dissatisfaction of citizens regarding local taxes and the SMG provides pro bono legal counsel for citizens who wish to file an objection regarding local taxation but cannot afford a lawyer.
Anytime, Anywhere Pay TaX Quickly and Easily with ETAX
For better and more conveniences, Seoul and Seoul agencies implement a tax payment system for the various bills of local taxes imposed by the 25 districts, such as water and sewage charges, to be paid through cash or credit cards.
The tax system leads to tax queries, tax refunds, and mileage system (Seoul Metropolitan Government, 2014a). While the bills are individually sent home, citizens are able to receive and pay electronic bills through websites, smartphone, SNS, etc., because of ETAX.
Figure 4-1. Electronic tax system.
A convenient tax payment system that enables citizens to pay by cash or credit cards, the local taxes and bills imposed by Seoul, its affiliated agencies, and district offices in order to remove the inconvenience of visiting banks for tax payment. At the ETAX website (https://etax.seoul.go.kr), or mobile S-Tax, taxpayers can view taxes and arrears, tax receipts and payments, and accumulate tax mileage. It is possible to make tax payments through a variety of means such as the Internet, mobile phones, convenience stores, CD / ATM, ARS and smartphones.
“Seoul S-Tax” mobile application is also available to the citizens. Motor vehicle tax, property taxes, water rates, parking fines and 400 other types of taxes can be accessed online and be paid via smartphone using the mobile application.
Figure 4-2. Electronic tax system through mobile phone.
In 2006, online payments were at a proportion of 11.7%. Whereas in 2013, with ETAX and electronic payment methods (virtual accounts, CD/ATM, smartphone), there was a total number of 1,610,000 cases with an excess of 79.6% of the total payments (Seoul Metropolitan Government, 2014a). Because the demand for use-friendly tax payment system was unprecedentedly increased, Seoul Metropolitan Government (SMG) had to develop ETAX system. Using benchmarking from ETAX, all national local governments have started to use ETAX, since it first went into operation. Since 2007, Ministry of Safety and Public Administration (MOSPA) launched WETAX, an online tax payment system for all the local governments, similar to ETAX.
Figure 4-3. Electronic tax system strategy.
Formation of cooperative networkCitizens rely on bank transfers for tax payments and credit card transaction system. Close cooperative networks have been formed through E-TAX with a local Woori Bank, which links 22 other banks and credit card companies.
Dealing with online security problemsTaxpayer privacy are prevented using various measures, including private firewalls, website security solutions and cryptography modules and certification-based services are adopted to further protect private tax information. In addition, internet servers and database servers are placed in a physically separate network, so that even in case of a web server attack, access to the personal data stored in the database server is fundamentally blocked.
Legal backgroundArticles on digitization of local tax handling and operation plan for local tax handling information system were established in 2010.
- Digitization of local tax business related to information system (Local Tax Act, Article142)
- Establishment and implementation of local tax collection information system planning. (Article 142 - 2)
- Delivery of electronic notice related documents (Local Tax Act, Article 28)
- Ordinance on support for mileage for Seoul’s model taxpayers. (Article 3 Support related with tax mileage)
- Regulation for ordinance on support for Seoul’s model taxpayers. (Article 3 Selection and support for electronic taxpayers, and provided a basis for mobile-based or internet-based tax payment in consideration of the changes in internet environments)
Figure 4-4. Providing various information based on ETAX
Source: Seoul ETAX payment webpage
1.1. Seoul ETAX Function
(1) View and Pay Tax
(2) Tax Filing and Payment
(3) Confirm Payment and Receipt
(4) View and Apply for Refund
(5) Electronic Notices
(6) Mileage System
(7) Local Tax Information Provided
Figure 4-5. The Function of Electronic Tax system.
1.2. Expectations from ETAX
- Maximize the convenience of taxpayers by providing customized service, called “My e-TAX Service” and enable timely processing of administrative work via electronic and online processes
- Improve payment rate and effectively access and manage the storage of electronic bills
- Increase the rate of tax payment with user-friendly processes
Figure 4-6. User-friendly Electronic Tax system.
1.3. Vision of ETAX
The system of SMG is developed by flexible and creative organizational structure. Second, the online tax payment service provides a rapid civil service by reducing the repeated procedures based on information-based technology. For instance, ‘One Click’ provides clear process without disconnection. Third, the network with other division and department ensures the efficiency through the sharing of relevant information and collaboration system between relevant agencies. Fourth, the online tax payment service provides the customized services using a variety of information.
Figure 4-7. Vision of Electronic Tax system.
Seoul City Special Operations Strategy
• Cooperative Network with Private Sector for System Building
Bank transfers for tax payments and credit card transaction system are essential elements for seamless system linkages between financial institutions. MOSPA, Korean Financial Telecommunications and Clearings Institute, and close cooperative networks have been formed through E-TAX with Woori Bank as a pivot linking 22 other banks and credit card companies.
• Strong Security Measures to Protect Taxpayer Privacy
To protect taxpayer privacy, prevention of keyboard hacking, private firewalls, website security solutions and a cryptography module have been applied. Through the provision of certification-based services, private tax information is protected from external queries. Additionally, by locating the internet servers and database servers to a physically separate network, even in case of a web server attack, access to the personal data stored in the database server is fundamentally blocked. Database encryption handling is utilized and measures are taken to avoid any possible data loss.
• Legal Provisions Provided for Electronic Payment Method
In 2010, articles on
Application Example and Operation Outcome
• Rapid increase in electronic tax user numbers
In 2006, online payments were at a proportion of 11.7%. Whereas in 2013, with ETAX and electronic payment methods (virtual accounts, CD/ATM, smartphone), there was a total number of 1,610,000 cases with an excess of 79.6% of the total payments.
• ETAX System Benchmarking by Local Governments
Using benchmarking from ETAX, all national local governments have started to use ETAX, since it first went into operation. Since 2007, Ministry of Safety and Public Administration(MOSPA) launched WETAX, an online tax payment system for all the local governments, similar to ETAX
• Domestic and International Certification and Awards
Japan, Thailand, Uzbekistan benchmarked ETAX
The Open Tax Court
Open Tax Court System empowers the petitioner to participate in the discussion process. Official from the tax division of the city will be given the role of defending the citizen, thus resulting in the development of a more transparent tax administration system. The entire hearing process is open to the general public thereby achieving higher level of transparency.
Figure 4-8. The Open Tax Court.
Effectiveness of Open Tax Court
By making the examination process of local tax objections open to the public, while also providing the petitioner with the opportunity to participate and give a personal statement, the city has tried to ensure maximum transparency in the provision of remedies to citizens. Furthermore, in order to attain objectivity and credibility in an examination, the Local Tax Examination Committee, whose role is to make the final decision regarding objections, was made up of lawyers, accountants and tax accountants and an incumbent judge was made to head the committee to lead the objection examination process.
The official who is responsible for the local tax levy attends the session in person to explain and justify the reason for the taxation before an audience, which includes general citizens. By having a member of the city’s tax department (special tax advocate) speak in defense of the petitioner, district government officials have become more cautious when imposing local taxes. These measures have resulted in a 24.8% decrease in improperly imposed taxes in two years and seven months. The satisfaction level of petitioners rose to 96.8 points out of 100.
In sum, the effectiveness of the ‘Open Tax Court’ does not come from pursuing remedies after taxes have been levied, but eliminating improperly imposed taxes by the government. This is an example where government is trying to redefine its role and quality manager. Through institutional innovation to secure the preciseness, fairness and credibility of local tax administration, the open system promotes public participation and is a model for good governance by local governments.
The Trial Strategy
Figure 4-9. The Open Tax Court Trial Strategy.
First, allow petitioner to directly participate and put forward their statement during the local tax objection process. This has secured transparency in the examination process, fairness in ruling and contributed to the elimination of public distrust toward tax imposition.
Second, request relevant tax officer to attend the session. This allowed the city to rectify any mistakes and eliminate falsely imposed taxes.
Third, appoint a tax officer to the defendant, with expertise in tax administration, as a ‘special tax advocate’ on behalf of a citizen. This allowed the financially-challenged citizens in their efforts to pursue remedies.
And finally, allow the general public to attend the open deliberation. This provided citizens with chances to learn about tax, which has contributed to heightening their understanding of taxation policies.
The Open Tax Court’s Objectives
The Open Tax Court system reduced the burden of citizens who filed complaints regarding wrongfully imposed local taxes. Thus, more complaints were submitted regarding the examination of local taxes, because citizens became more distrustful of the fairness and credibility of the process. In order to address this problem, the SMG opened the process to the public and provided citizens with local tax experts. The objectives of the Open Tax Court are shown in the following illustration.
Figure 4-10. The Open Tax Court Objectives.
The Open Tax Court’s Benefits
There are few advantages to having an Open Tax Court. First, external committee members, such as lawyers and tax accountants, were usually paid fees when they attended the closed, documentary examinations in the past. In making the examination sessions open to the public, experts have volunteered to participate in the process, so there is no additional cost. Second, there is no need to hire additional staffs to run the committee as the current tax staff members are overseeing the ‘Open Tax Court.’ Wrongfully imposed taxes were either reduced or eliminated. Citizens also benefited from ‘pro bono advocate’ who had expertise in local taxation system. Local tax experts who worked in the SMG cooperated by working as pro bono advocates to assist taxpayers.
The Open Tax Court’s Obstacles and Overcome Method
Figure 4-11. The Open Tax Court’s Obstacles and Ways to Overcome Them.
Difficulties Deriving from Objections Within the Organization
Resolving Conflicts Through Persuasion and Education
At present, the employees of district governments are more favorable to the system in that it provides them with the chance to openly verify the validity of their decision on tax imposition.
The Open Tax Court’s Positive Results
Figure 4-12. The Open Tax Court’s Positive Results.
Supporting Citizens With Expertise
Elimination of Factors Leading To Corruption With A Transparent And Open Tax Administration System