Whether an amount equivalent to the value-added tax reduced to be treated as a mere payment without actually paid constitutes an additional collection under Article 106-4(3) of the former Restriction of Special Taxation Act and Article 106-7(3) of the former Restriction of Special Taxation Act (affirmative in principle)

Article 106-4(1) and (2) (see current Article 106-7(2) and (3) (see current Article 106-7(3)) of the former Restriction of Special Taxation Act (Amended by Act No. 8827, Dec. 31, 2007); Article 106-7(1), (2), and (3) of the former Restriction of Special Taxation Act (Amended by Act No. 9272, Dec. 26, 2008); Article 106-7(1), (2), and (3) of the former Restriction of Special Taxation Act (Amended by Act No. 9272, Dec. 26,

Han Industrial Transport Co., Ltd. (Law Firm Lee & Lee, Attorneys Ba-won, Counsel for the defendant-appellant)

Head of Geumcheon Tax Office

Seoul High Court Decision 2010Nu17443 decided November 3, 2010

The judgment below is reversed and the case is remanded to Seoul High Court.

The grounds of appeal are examined (to the extent of supplement in case of supplemental appellate briefs not timely filed).

1. As to the second ground for appeal

A. Article 106-4 of the former Restriction of Special Taxation Act (amended by Act No. 8146 of Dec. 30, 2006, by Act No. 8827 of Dec. 31, 2007, “the Restriction of Special Taxation Act”) provides that “50/100 of the payable amount of value-added tax on a general taxi transport business entity under the Passenger Transport Service Act shall be reduced by the taxable period ending on or before December 31, 2008,” and Paragraph (2) of the same Article provides that “the abated tax amount under paragraph (1) shall be used for improvement in treatment and improvement in welfare of a general taxi transport business entity under the Passenger Transport Service Act as prescribed by the Minister of Construction and Transportation,” and the amended Restriction of Special Taxation Act (amended by Act No. 8827 of Dec. 31, 2007, by Act No. 927 of Dec. 26, 2008,” and Article 106-27 of the Restriction of Special Taxation Act.

Article 100-2 of the former Regulation of Tax Reduction and Exemption Act (amended by Act No. 4952 of Aug. 4, 1995) introduced a system that reduces 50/100 of the amount of value-added tax payable so that a general taxi transport business entity, who is liable to pay value-added tax, can use it as financial resources for wage increase. However, unlike its original purpose, labor-management disputes have occurred frequently due to the problems such as appropriation of the amount of value-added tax reduced to welfare expenses that the general taxi transport business entity previously assumed, and Article 106-4 (2) of the former Restriction of Special Taxation Act (amended by Act No. 7322 of Dec. 31, 2004), which was amended by the Minister of Construction and Transportation, provides that the amount of value-added tax reduced should be used only for improving treatment and welfare of general taxi transport business entities, and the Ministry of Construction and Transportation has not introduced the amended provision of the Restriction of Special Taxation Act (amended by Act No. 1065, Apr. 2, 2005).

Therefore, in light of the legislative intent of the Restriction of Special Taxation Act and the amendment of the Restriction of Special Taxation Act that provides for the reduction of the amount of value-added tax to general taxi transport business operators, the amount of value-added tax reduced shall be actually used for the improvement of treatment or welfare of general taxi transport business operators, and the amount of value-added tax reduced after January 1, 2007, which was not used as such, shall be subject to additional collection. Therefore, even if the labor-management agreed that only a part of the amount of value-added tax reduced is paid and the remainder is deemed included in wages, etc., the amount of value-added tax reduced shall be deemed as having been paid within the scope of the disputed amount, in light of the motive and circumstance leading up to the agreement, etc. that may be considered as having been actually used for improvement of treatment or welfare of general taxi transport business operators, barring special circumstances, it shall be deemed that the amount equivalent to the amount of value-added tax reduced that is treated as having been paid only without actually paid constitutes subject to additional collection.

B. Review of the reasoning of the lower judgment and the evidence duly admitted reveals the following facts.

(1) When entering into a wage agreement in 1995 in which 16 transportation companies including the Plaintiff, a general taxi transport business entity, and the Plaintiff’s labor union affiliated with the Plaintiff’s labor union (hereinafter referred to as the “regional taxi trade union”) raise the basic pay and allowances, the Addenda states that “the direct benefits out of the amount of value-added tax reduced were calculated by including the amount of direct benefits, and the amount of indirect benefits out of the amount of value-added tax reduced is used by the business entity to promote the welfare of its members.” While there were the same provisions as the Addenda to the wage agreement in 1996 concluded by the Plaintiff and the regional taxi trade union, the collective agreement or the wage agreement after 201 did not explicitly stipulate the amount of value-added tax reduced

② As a result, until November 2006, there was a dispute over whether the amount equivalent to the value-added tax reduced (13,12 won per month or 32,611 won) calculated by the wage increase included in the wage increase pursuant to the wage agreement in 1995 and 1996 between the Plaintiff and the Plaintiff’s trade union was continuously included in the wage under the name of the amount of value-added tax reduced, and in the process, the Plaintiff and the Plaintiff’s trade union made a temporary payment of KRW 33,00 per person per capita from November 14, 2006 to June 207 (hereinafter “instant agreement in 2006”) to the effect that “If a higher organization has concluded negotiations on the wage increase in 207 and the amount of value-added tax reduced, it shall follow the agreement and re-consultation on the unpaid amount” (hereinafter “instant agreement”).

③ However, on November 1, 2007, the Plaintiff and the Plaintiff’s trade union agreed that “The value-added tax reduction amount up to December 31, 2008 shall be paid in installments in 50,000 won per worker from November 31, 2007 to March 2009, and five million won shall be paid from the assessed value-added tax reduction amount for the first time in 2007 under the name of workers’ meeting (hereinafter “instant agreement”).

④ Furthermore, in addition to the agreement in June 20, 2007 of this case, the Plaintiff and the Plaintiff’s trade union shall pay the full amount of the value-added tax reductions under the Restriction of Special Taxation Act for the total amount of the value-added tax reductions from January 2007 to December 2008. While the Plaintiff has been paying the value-added tax reductions under the Restriction of Special Taxation Act, on November 1, 2007, the labor-management council agreed to pay the value-added tax reductions for 2 years from January 2007 to December 2008 in 17 months from the date of payment of the value-added tax reductions amount of the value-added tax reductions for the employees from November 2007 to March 209 (hereinafter “the agreement”). However, the difference shall be deemed to have been paid for the indirect expenses, the association members’ welfare funds, and part of the wages.”

⑤ According to the instant agreement in 2007 and 2008, the Plaintiff paid 50,000 won per capita to the individual worker for the period from November 2007 to 17 months.

C. Examining the above facts in light of the aforementioned legal principles, there was a dispute as to whether the amount of value-added tax reduced included in the wage increase pursuant to the wage agreement in 1995 and 1996 included in the subsequent wage, and thus, there was an agreement on temporary payment. However, unlike this agreement in 2007 and 208, the amount of value-added tax reduced from January 2007 to December 2008 should be paid in cash for the purpose of implementing the agreement to pay 50,000 won per worker for the year from November 207 to 17 months (hereinafter “the agreement on the installment payment”). On the other hand, it is difficult to consider the difference between the actual reduced tax amount for taxi drivers and the amount under the direct payment agreement in 207 and the amount under the above agreement on the improvement of treatment for the general taxi drivers including value-added tax for 200 to 209,000,0000 won for the purpose of the agreement on the improvement of treatment for the general taxi drivers.

Nevertheless, the lower court did not specifically examine and determine whether the amount of direct wage paid to the ordinary taxi drivers of the Plaintiff company and the amount actually used for improving the treatment or welfare of ordinary taxi drivers among the amount of reduced value added tax for the second period portion in 2007 and the first period portion in 2008, which became the object of the instant disposition, was used for improving the treatment and welfare of the transport employees, and on the premise that according to the instant agreement in 2008, if the Plaintiff pays all the money stipulated in the instant agreement for installment payments, the amount of reduced value-added tax would be used for improving the treatment and welfare of the transport employees, on the basis that the Plaintiff paid all the money pursuant to the instant agreement for installment payments, and determined that the collection of the unpaid amount out of the amount of reduced value-added tax was unlawful.

Therefore, the judgment of the court below is erroneous in the misapprehension of legal principles as to the scope of the reduced value-added tax amount which can be viewed as being used for the improvement of treatment and welfare of general taxi drivers as stipulated in the Restriction of Special Taxation Act and the revised Restriction of Special Taxation Act, thereby failing to exhaust all necessary deliberations, which affected the conclusion of the judgment.

2. Conclusion

Therefore, without further proceeding to decide on the remaining grounds of appeal, the lower judgment is reversed, and the case is remanded to the lower court for further proceedings consistent with this Opinion. It is so decided as per Disposition by the assent of all participating Justices on the bench.

Justices Shin Young-chul (Presiding Justice)