The rapid pace of transformation to a digital economy in the past few years has touched on nearly every aspect of Korea's economy. The surge in e-commerce represents such a trans formation. The potential economic impact of e-commerce is huge: For exam...
The rapid pace of transformation to a digital economy in the past few years has touched on nearly every aspect of Korea's economy. The surge in e-commerce represents such a trans formation. The potential economic impact of e-commerce is huge: For example, amongst others, it has already reduced transaction costs, which have led to lower production costs, it has potential to enhance transparency in economic activities, and; it has helped transform the country's economic structure making it more competitive. The importance in comprehensively understanding the economic effects of e-commerce, as well as in implementing correct policies that encourage e-commerce cannot be overemphasized.
Diverse policy tools are available that if adopted properly may foster e-commerce. Tax incentives are an important means to encourage e-commerce. We should therefore look into the possibility of considering a reduction in the value-added tax. However, the practical Implementation of a tax cut is never easy as tax reduction Without generating additional tax sources decreases tax revenue thus making some government officials resistant to considering such tax incentives.
We observe that e-commerce makes transactions increasingly transparent This implies that e-commerce tends to raise the collectable tax revenue relative to the entire tax base. Hence, tax revenue does not necessarily fall despite a tax cut that is targeted at encouraging e-commerce. Our study shows that the amount of a tax cut equal to 0.092% of total sales value is neutral In that this does leaves actual tax revenue collected unaffected.