In the current tax law, it is stipulated that secondary tax liability is imposed upon a taxpayer and his related party or that additional tax liability is imposed upon a taxpayer by denying his activity or transaction with his related party.

The tax system in which secondary tax liability is borne by a corporation and its related party or which denies activities and accounts between a taxpayer and his related party has its fairness and rationality only in case the taxpayer and his related party belong to the same economic group with the same economic interest or only in case the taxpayer and his related party have close relationship that they give gratuitous economic interest to the other taxpayer and the other related party, neglecting economic rationality. It is considered to lack in fairness if one who does not have such relationship is included in the scope of a related party and bears disadvantages in tax. However, the provisions concerning a related party has a lot of problems and has been criticized for violating taxpayers' rights and fair taxation.

The specific problems and proposals for improvements are as follows :

First, the provisions on the scope of relatives fail to reflect changes in family institutions according to the trend of increasing nuclear family, and are so broad that they violate taxpayers' rights. In addition, since the provisions on the scope of relatives in the existing tax law expands the scope of paternal blood relatives rather than maternal blood relatives, of man's relatives by marriage rather than wife's relatives by marriage, the provisions are against Article II of the Constitution stipulating individual dignity and equality of the sexes in marriage and family life.

It is necessary to reduce the scope of relatives to blood relatives in the third degree and their spouses, and to spouse's blood relatives in the second degree and their spouses. It is also necessary to abolish the provisions stipulating the qualifications of a relative of a married woman with the criterion of her husband in case the woman is a shareholder and to make her the criterion to determine a relative's qualifications.

Second, the provisions stipulating the scope of a relative party vary according to related provisions, so they may confuse taxpayers. It is thus required to enact definition provisions stipulating the scope of basic relatives and of related parties in Article 2 of the Basic Act of National Taxes. However, only in case there are special cases to which it is impossible to apply the definition stipulations concerning blood relatives and relative parties in Article 2 of the Basic Act of National Taxes, there should be exceptional provisions for individual case respectively.

Third, it is also necessary to set forth the specific scope by delegating the scope of relative parties to President's decrees.

Fourth, it is desirable to limit the shareholders included in the related party to dominant shareholders.

Fifth, it is also necessary to abolish secondary tax liability imposed upon the spouses of oligopolistic shareholders, an acquisition tax imposed upon oligopolistic stockholders for legal fiction of acquisition, and a gift tax imposed upon stockholders for interests from unlisted stocks.