Proceedings of 32nd International Business Research Conference
23 - 25 November, 2015, Rendezvous Hotel, Melbourne, Australia
ISBN: 978-1-922069-89-4
Solving the Tax Evasion Problem by Co-opting the Public:
The Korean Cash Receipts System
Namryoung Lee and Charles Swensona
Abstract
In 2005 the Korean government instituted a mandatory cash receipts system to curb tax
evasion by cash-based companies in the retail sector. The Korean National Tax Service
estimated that this unique system decreased evasion by 5% to 7% per year. Despite this
success, our study indicates that the system also had unintended consequences,
increasing sales in the retail industry, decreasing payments to vendors dealing with that
industry, and causing firms to exit the market. The results are consistent with general
equilibrium economics predictions. There were also resultant wealth transfers to lowermiddle and middle-class taxpayers.
JEL Classifications: F23, H25
Key Words: Tax Evasion, Tax Shifting, Income Tax
____________________________
Namryoung Lee, Associate Professor of Accounting, Korea Aerospace University, South Korea.
aProf.
Charles Swenson, Corresponding Author, Leventhal Research Fellow, Marshall School of Business,
University
of
Southern
California,
Los
Angeles,
CA
90089-0808,
USA,
E-mail: cswenson@marshall.usc.edu, Phone: 213-740-4854