A study on major issues of Offshore Voluntary Disclosure Program in South Korea

Abstract

The Offshore Voluntary Disclosure Program is a new approach to tackling offshore tax evasion that offers taxpayers the opportunity to improve their compliance. This paper analyzes whether the Offshore Voluntary Disclosure Program in Korea can increase tax compliance, and suggests improvements to make this system work more effectively. The author stresses that increasing government spending and the seriousness of offshore tax evasion necessitate the Offshore Voluntary Disclosure Program. The Offshore Voluntary Disclosure Program itself has been examined to have no critical problems, considering other voluntary disclosure programs in foreign countries. The Offshore Voluntary Disclosure Program has an appropriate incentive structure to influence tax compliance positively for all taxpayers including both compliant and non-compliant taxpayers. This paper emphasizes that congruity between the Offshore Voluntary Disclosure Program and relevant institutions is key to the programs success. General enforcement efforts such as tax audits and the Foreign Financial Accounts Reporting should be gradually enforced. In the course of implementing the Offshore Voluntary Disclosure Program, the tax authority needs to reinforce its communication strategy with both targeted taxpayers and compliant taxpayers. Finally the author calls for greater attention to the reform of the tax system in the belief that simplifying the tax system is a fundamental method for discouraging tax evasion.