The Korean Approach to Solving Tax Evasion
In 2005 the Korean government instituted a mandatory cash receipts system to curb tax evasion by cash-based companies in the retail sector. We estimate that the system significantly decreased business tax evasion, and was cost-effective. Because it was a significant intervention, the system also had unintended consequences, including increased prices in the retail industry, firms exiting the market, and asymmetric wealth transfers across classes of individual taxpayers. The results have important policy implications for countries and/or subnational governments which consider adopting similar systems.
Index Terms—Taxation, public policy; economics