• Korean small business review
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• v.31 no.2
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• pp.85-102
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• 2009

With the continued globalization of world markets, transfer pricing has become one of the dominant sources of controversy in international taxation. Transfer pricing is the process by which a multinational corporation calculates a price for goods and services that are transferred to affiliated entities. Consider a Korean electronic enterprise that buys supplies from its own subsidiary located in China. How much the Korean parent company pays its subsidiary will determine how much profit the Chinese unit reports in local taxes. If the parent company pays above normal market prices, it may appear to have a poor profit, even if the group as a whole shows a respectable profit margin. In this way, transfer prices impact the taxable income reported in each country in which the multinational enterprise operates. It's importance lies in that around 60% of international trade involves transactions between two related parts of multinationals, according to the OECD. Multinational enterprises (hereafter MEs) exert much effort into utilizing organizational advantages to make global investments. MEs wish to minimize their tax burden. So MEs spend a fortune on economists and accountants to justify transfer prices that suit their tax needs. On the contrary, local governments are not prepared to cope with MEs' powerful financial instruments. Tax authorities in each country wish to ensure that the tax base of any ME is divided fairly. Thus, both tax authorities and MEs have a vested interest in the way in which a transfer price is determined, and this is why MEs' international transfer prices are at the center of disputes concerned with taxation. Transfer pricing issues and practices are sometimes difficult to control for regulators because the tax administration does not have enough staffs with the knowledge and resources necessary to understand them. The authors examine transfer pricing practices to provide relevant resources useful in designing tax incentives and regulation schemes for policy makers. This study focuses on identifying the relevant business and environmental factors that could influence the international transfer pricing of MEs. In this perspective, we empirically investigate how the management perception of related variables influences their choice of international transfer pricing methods. We believe that this research is particularly useful in the design of tax policy. Because it can concentrate on a few selected factors in consideration of the limited budget of the tax administration with assistance of this research. Data is composed of questionnaire responses from foreign firms in Korea with investment balances exceeding one million dollars in the end of 2004. We mailed questionnaires to 861 managers in charge of the accounting departments of each company, resulting in 121 valid responses. Seventy six percent of the sample firms are classified as small and medium sized enterprises with assets below 100 billion Korean won. Reviewing transfer pricing methods, cost-based transfer pricing is most popular showing that 60 firms have adopted it. The market-based method is used by 31 firms, and 13 firms have reported the resale-pricing method. Regarding the nationalities of foreign investors, the Japanese and the Americans constitute most of the sample. Logistic regressions have been performed for statistical analysis. The dependent variable is binary in that whether the method of international transfer pricing is a market-based method or a cost-based method. This type of binary classification is founded on the belief that the market-based method is evaluated as the relatively objective way of pricing compared with the cost-based methods. Cost-based pricing is assumed to give mangers flexibility in transfer pricing decisions. Therefore, local regulatory agencies are thought to prefer market-based pricing over cost-based pricing. Independent variables are composed of eight factors such as corporate tax rate, tariffs, relations with local tax authorities, tax audit, equity ratios of local investors, volume of internal trade, sales volume, and product life cycle. The first four variables are included in the model because taxation lies in the center of transfer pricing disputes. So identifying the impact of these variables in Korean business environments is much needed. Equity ratio is included to represent the interest of local partners. Volume of internal trade was sometimes employed in previous research to check the pricing behavior of managers, so we have followed these footsteps in this paper. Product life cycle is used as a surrogate of competition in local markets. Control variables are firm size and nationality of foreign investors. Firm size is controlled using dummy variables in that whether or not the specific firm is small and medium sized. This is because some researchers report that big firms show different behaviors compared with small and medium sized firms in transfer pricing. The other control variable is also expressed in dummy variable showing if the entrepreneur is the American or not. That's because some prior studies conclude that the American management style is different in that they limit branch manger's freedom of decision. Reviewing the statistical results, we have found that managers prefer the cost-based method over the market-based method as the importance of corporate taxes and tariffs increase. This result means that managers need flexibility to lessen the tax burden when they feel taxes are important. They also prefer the cost-based method as the product life cycle matures, which means that they support subsidiaries in local market competition using cost-based transfer pricing. On the contrary, as the relationship with local tax authorities becomes more important, managers prefer the market-based method. That is because market-based pricing is a better way to maintain good relations with the tax officials. Other variables like tax audit, volume of internal transactions, sales volume, and local equity ratio have shown only insignificant influence. Additionally, we have replaced two tax variables(corporate taxes and tariffs) with the data showing top marginal tax rate and mean tariff rates of each country, and have performed another regression to find if we could get different results compared with the former one. As a consequence, we have found something different on the part of mean tariffs, that shows only an insignificant influence on the dependent variable. We guess that each company in the sample pays tariffs with a specific rate applied only for one's own company, which could be located far from mean tariff rates. Therefore we have concluded we need a more detailed data that shows the tariffs of each company if we want to check the role of this variable. Considering that the present paper has heavily relied on questionnaires, an effort to build a reliable data base is needed for enhancing the research reliability.

• Environmental and Resource Economics Review
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• v.26 no.2
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• pp.257-286
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• 2017

This paper estimates the effects of imaginary repeated increases in excise duties on fuel oil consumption and on their income redistribution according to changes in consumer price index, if the inflation indexation system was introduced right after the second Energy Tax Reform ended in July, 2007 in Korea. In fact, nominal excise rates have not been adjusted since 2007. As a result, the real excise rates on fuel oils have been diminished inversely proportional to the consumer price index. Own- and cross-price elasticities of fuel oils such as gasoline and diesel oil are estimated under the general equilibrium framework based on the linear expenditure system. Counterfactual analyses through microsimulation in a static model are adopted to estimate the effects of introducing inflation indexation into the fuel tax in 2007 when the second Energy Tax reform ended on the fuel consumption and income redistribution in 2014. Microsimulations suggest that its introduction could have reduced the consumption of gasoline and diesel oil by 8.8% and 5.4%, respectively, ending up with increased excise revenue by 11.9%. The revenue increase in spite of decreased consumption is mainly because their demands are price inelastic. It could also have increased positive income redistributive effect by 0.01%p (from 0.12% to 0.13%), which is measured in terms of percentage decrease in Gini coefficient. In other words, the fuel excise on the two fuel oils decreased by 0.13% the Gini coefficient of before and after fuel tax income in 2014. This implies that the inflation indexation could have enlarged the income redistributive effect up to 0.13% in 2014, if it is introduced in 2007.

• Environmental and Resource Economics Review
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• v.16 no.1
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• pp.129-169
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• 2007

The purpose of this study is to experiment and simulate the newly-updated Second Generation Model for Korea (SGM-Korea). With the updated model, we tried to simulate effect of carbon tax on $CO_2$ emissions and other macroeconomic variables for Korea. The baseline data are compared with projected profiles by various scenarios to evaluate its performance. Our contribution in this study is to having up-graded the model from its earlier version by building new hybrid input-output table based on 2000 input-output and energy balanced tables. According to our estimation, total $CO_2$ emission in Korea has already increased in 2000 to about 1.86 times the 1990 figure. The level of carbon tax required for the current level of $CO_2$ emission to be reduced to the 1995 or 2000 level seems to be too high for Korean economy to bear. It is possible to find a reasonable level of carbon tax, however, if it can combine it with improvement of energy efficiency at the rate of 0.5% to 1% per year. For Korea to meet its obligation to reduce $CO_2$ emissions, therefore, it is imperative for her to improve energy efficiency as well as to develop alternative energy source reducing its dependence on fossil fuel.

• Journal of Environmental Impact Assessment
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• v.5 no.2
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• pp.49-57
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• 1996

On the basis of sustainable long-term water resources planning, the development of ground water resources should be interlocked with the surface water development In considering the intertemporal equity, overpumping of groundwater may diminish or eliminate the groundwater resources stock of post-generations. Regulatory landuse zoning for groundwater resources recharge area is indispensable measures to prevent groundwater pollution. Adequate treatment of polluted water from various sources such as municipal sewage, industrial wastewater, landfill site leachate, and abandoned boring wells, is also necessary for groundwater protection. To preserve groundwater resources as common property goods, groundwater use tax should be imposed upon the large scale groundwater use. Finally, the establishment of groundwater development license system is recommended to achieve the social optimal production and to avoid external diseconomy.

• Journal of the Korea Society for Simulation
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• v.13 no.2
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• pp.35-43
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• 2004

The purpose of this study is an economic analysis of power plant utilities by comparing electricity generating cost including environmental costs. Considering the enormous role of electricity in the national economy, it is very important to study the effect of environmental regulation on the electricity sector. Because power utilities need for large investment during construction, operation and maintenance, and also require much construction lead time. Economic analysis is the important process in the electric system expansion planning. This paper compares the costs of electricity generation including environmental costs between a coal-fired power plant and an LNG combined cycle power plants. With the simulation, this study surveys the sensitivity of fuel prices, interest rate and carbon tax. In each case, this sensitivity can help to decide which utility is economically better in environmental regulation circumstance.

• Journal of Environmental Impact Assessment
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• v.28 no.2
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• pp.141-151
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• 2019

Korea has passed the Act on the Integrated Control of Pollutant-Discharging Facilities in 2015, and the integrated environmental management under the BAT standard is underway. To summarize the nature of integrated environmental management, it is the regulation by the integration of the management of the multi-pollutant source and the technical standard of BATs. In general, in environmental economics, regulation-based on technical standards are known to be inefficient. This paper attempts to evaluate the efficiency of BAT standards from an economic point of view. A simple multi-pollutant model demonstrates that the inefficiency of the environmental tax with imperfect information in a single pollutant situation is amplified under multi-pollutant conditions. The simultaneous introduction of BAT and IPPC can be partially explained by this logic. It is also highlighted by the strengthening of BAT standards by EU, as a countermeasure to the potential deterioration of air quality caused by the change of effective environmental taxes accompanying the fuel and emission price changes.

• Journal of Environmental Impact Assessment
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• v.8 no.1
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• pp.133-139
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• 1999

Community residents are tend to evade waste treatment facilities such as waste landfills, waste incinerators. Therefore, decision-makers of waste management are concerned about the reduction and recycling of food garbage. As a treatment alternative of food garbage which consists of 30% of municipal waste, producing compost and feed stuff from food garbage is environmentally amenable. In considering the characteristics of food garbage are putrid and high moisturized, methods of landfilling and incineration for food garbage are environmentally inadequate. For the institutionalization of food garbage recycling, separate discharge, establishment of collection system, securing of market for compost and feed stuff manufactured from food garbage, and tax and financial incentives for food garbage recycling facilities are necessary.

• The Journal of Asian Finance, Economics and Business
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• v.7 no.7
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• pp.343-348
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• 2020

So far, research into multinational bank' overseas expansion has focused on foreign direct investment in the financial services industry. However, this study focused its existing theories on multinational banks on decision-making related to the type of overseas advancement of local financial institutions. For research, four environmental factors were considered: the scale of foreign direct investment, the scope of financial services that can be provided according to the rules of the host country, the corporate tax rate of the host country, and the level of development of the host country's banking industry. Through Kotra, data on the total amount of claims from 2010 to 2014 and the regulatory status for the country's financial industries were obtained. Hypothesis are built around theories and survey factors and has been demonstrated through regression analysis. Results show that Korean financial institutions tend to expand as legally independent subsidiaries where the corporate tax rate of the host country is relatively low. Contrary to the previous studies based on the U.S. banking corporates, results show that Korean banks tend to expand in forms of branches to the host countries with high level of banking system development.

• Proceedings of the KSRS Conference
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• 2002.10a
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• pp.417-422
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• 2002

Kakegawa City is located at 138 deg. E and 34 deg. 45 min. N, in the west of Shizuoka Prefecture. Its population is approximately eighty thousands and its area is 185.79 square kilometers as shown in Fig.1. The city government has been developing GIS for the purpose of land management and tax base calculation and is one of the most advanced local governments in Shizuoka Prefecture. The city government has been developing the database of various kinds of physical and social environmental information, but the city government uses small parts of the database only fur land management and tax base calculation. The purpose of this report is to show the database of kakegawa City as shown in Table 1 and propose the effective usage of the database. The database of Kakegawa City as shown in Fig.2 and Fig.3 is imported to GIS in our laboratory and reconstructed as the database retrievable from each individual land. The authors developed the retrieval system of each individual land and combined it to the reconstructed database. If our GIS is open to the public, a lot of citizens will get useful information about their environments.

• Maritime Security
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• v.3 no.1
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• pp.187-210
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• 2021

In recent years, many countries are committing to environmental conservation. Following this trend, successful policy implementation of SDGs with ESG management extended to the public sector is emerging as a keyword determining the success or failure of the capital market, countries, and individual companies. Accordingly, many countries are implementing various policies related to the environment. One of them is to implement national policies by introducing environmental taxes. These policies use environmental taxes to control pollution by indirectly influencing the behavior of producers or consumers through economic incentives rather than directly interfering with environmental pollution behavior. This study examines the status of environmental taxes in marine tourism sites in Korea, reviews the effectiveness of such policies, and suggests how to improve them by identifying limitations of the current system.