Editor’s Note
This article highlights a proposal from a tax accountant’s doctoral thesis to reform the jewelry industry’s tax system by introducing dual-purpose invoices. The system aims to prevent double taxation by clearly separating taxable and tax-exempt transactions.
A proposal has been made to apply the dual-purpose tax invoice system to the jewelry industry. The dual-purpose tax invoice is a slightly modified version of the existing tax invoice form, which separately records both taxable and tax-exempt portions.
argued Tax Accountant Cha Sam-jun in his recent doctoral dissertation in taxation at Kangnam University Graduate School, titled ‘A Study on Efficient Reorganization of the Tax Invoice System’.
As of 2018, Korea’s jewelry product exports amounted to $168 million, while imports were $483 million. All of Korea’s jewelry exports are semi-finished products, whereas imports are entirely finished products. As a result, exports are decreasing annually, while imports are gradually increasing. Due to these conditions, there is not a single listed company related to the jewelry industry in Korea’s stock market.
Furthermore, looking at the value-added tax (VAT) filing status for precious metal retail sales (2017), there were 6,741 voluntarily filing businesses with a total supply value of 771.468 billion won and a tax payment of 8.62 billion won. The average supply value per business was 114 million won, with an average tax payment of 1.3 million won.
asserted Accountant Cha.
There is a price difference of more than 10 times between famous foreign products like America’s Tiffany and Italy’s Bulgari and Korean products. The reason stems from the realistic circumstance that businesses transparently reporting their transactions inevitably lose competitiveness.
Therefore, Accountant Cha argues that simply changing the tax invoice system and adopting dual-purpose tax invoices would allow all businesses to pay taxes only on the value they themselves create, leading to industrial revitalization.
In his thesis, Accountant Cha comparatively analyzed the tax burden under the current tax invoice system versus the dual-purpose tax invoice system for each transaction stage: precious metal collection, jewelry product manufacturing, jewelry wholesalers, and jewelry retailers.
The analysis revealed that under the current tax invoice system, from the stage of collecting precious metals to manufacturing jewelry products, passing through wholesalers to retailers, the tax payment amount is much higher than the total actual value added, inevitably leading to VAT filing avoidance. However, under the dual-purpose tax invoice system, it was shown that only 10% tax on the value added produced by oneself is paid at each transaction stage.
he stated.