| Host | Korea TC – AMRO – OECD |
| Date | 6-8 December 2023 |
| Time | |
| Type | In-person |
| Venue | Vientiane, Lao PDR |
| Attendees | tax officials from the Tax Department, Ministry of Finance of Lao PDR |
Main Contents
| OECD Korea policy centre’s Tax Programme hosted 2023 Capacity Building Programme for the Lao Revenue Department (Session 1) in collaboration with the ASEAN+3 Macroeconomic Research Office (AMRO) and the OECD. The program was held in Vientiane, Lao PDR, from 6 to 8 December. It aimed at improving the basic comprehension and application of revenue forecasting and value-added tax (VAT) for Lao Revenue Department officials. The programme focused on the topic of ‘Revenue Forecasting and VAT’ and was attended by 35 tax officials from the Lao Revenue Department. The speakers were Dr. Deokhyun Ryu (Chung-Ang University), Dr Jae-Hyung Jang (Law Firm Yulchon), Hye-Jung Shim (National Assembly Budget and Policy Office), and Kyung-Yeop Baek (Tax Revenue Estimation Division 2), from Korea, as well as Sumio Ishikawa from AMRO. On the first day of the program, Sumio Ishikawa from AMRO gave a lecture on the analysis of the fiscal situation in Laos and policy recommendations. Mr Sumio Ishikawa covered Lao PDR’s national revenue and tax structure and examined the current status of the tax system. Dr. Ryu then delivered a lecture on the introduction to tax revenue forecasting. He explained that revenue forecasting is used as a complementary tool for government budgeting, with the primary purpose of forecasting tax revenues. He explained that in Korea, the Ministry of Strategy and Finance and the National Assembly Budget and Policy Office conduct tax revenue forecasting and introduced the types of direct and indirect taxes in Korea. He explained that the process of tax revenue forecasting consists of two steps. The first is forecasting economic environment variables, then adjusting the values to reflect the effects of possible changes to the model. Dr Jaehyung Jang (Law Firm Yulchon) covered the history of VAT in Korea and plans to increase it. He explained that Korea introduced the concept of VAT in 1971. However, It took 6 years to prepare, including the process of consulting with IMF and UN advisers and experts in the area of law and tax, as well as building the foundations for VAT systems such as understanding from the public and knowledge of administrations and officials. To make VAT system work efficiently, the government encouraged the use of receipts credit cards, and trained tax officials, set price guidelines to mitigate inflationary concerns, applied field research. He added that VAT had played an important role in South Korea’s economic growth as a major source of fiscal revenue, reducing tax evasion and enhancing boosting investment and exports. He pointed that VAT had also simplified the indirect tax system, with key factors for its success being the adoption of a single rate, a simplified rate structure, cross-checks at all stages of the transaction, good coordination between the National Tax Service and the Ministry of Strategy and Finance, and training and education of officials. On the second day, Professor Ryu Dukhyun gave a lecture on tax revenue forecasting. He first explained tax revenue forecasting for indirect taxes and then explained tax revenue forecasting for direct taxes. He introduced the types of indirect and direct taxes in Korea, explaining that direct taxes include income tax, corporate tax, and inheritance tax, while indirect taxes include value-added tax, liquor tax, securities exchange tax, and rural special tax. In terms of forecasting indirect taxes, direct taxes he explained an appropriate model to calculate them. The next lecture was given by Ms Shim Hye-jung, Tax Analyst, on the topic of tax revenue error and fiscal management. Pointing that the tax revenue error is increasing, she explained that if the error is large, it can affect fiscal operations. She explained that many countries, including South Korea, have experienced increasing errors since COVID-19, with relatively larger errors in the areas of property and corporate taxes. She explained that the problem of increasing errors is that it hinders effective fiscal operations, generates deficits, and weakens fiscal stability. The fluctuations in the economic cycle and errors in the base year that persist for two to three years would be the cause of the errors and the solutions include analysing errors to refine analytical models, using micro-information, measuring more frequently, and collaborating with private organisations and independent institutions. On the third day, Ms Shim Hye-jung covered the evolution and implications of Korea’s tax system. She noted that Korea’s tax system is distinguished with a simple tax system using simple tax rates and low tax rates and that tax revenues have increased with improvements in tax administration and economic growth. She also discussed the differences in tax systems between developing and developed countries, explaining that developed countries have a high share of consumption and income taxes, while developing countries have a high proportion of corporate and transaction taxes. She explained that in developing countries, where the underground economy is relatively large, the tax base is narrow, making it difficult for consumption taxes to work effectively. She suggested identifying the areas that cause inefficiencies in securing tax revenue and reducing them, rather than adopting the system of developed countries. Next, Mr. Baek Kyungyup gave a lecture on the changing economic environment and tax revenue forecast. He explained that tax revenue is the main source of government revenue and that tax revenue forecasting is to predict the revenue of the current and future years. He explained that tax revenue forecasting is important for preparing the National Assembly budget, but it also plays a large role in maintaining the stability of the national finances. He explained that tax revenue forecasting is done for the current year, the next year, 5 or 10 years, and up to 40 years in the long term. He introduced the model of the National Assembly Budget and Policy Office, mentioning the formula and each step of the calculation. During the three-day event, the participants showed high interest and enthusiastic participation. The program provided immediate and practical help by selecting the proper topics and providing practical knowledge as the Lao PDR is currently discussing a VAT increase. In addition, it was possible to provide basic background knowledge on tax revenue forecasting and introduce Korea’s model in detail, which received a positive response. In addition, Session 2 of the main capacity building programme on BEPS |
