This paper discusses general directions for tax reform in Korea and some focalpoints related to changing the current tax structure. In order to raise revenueand reduce efficiency costs, the size of the informal sector and tax evasion in theformal sector need to be reduced. Contrary to the popular belief, the distributivefunction of the income tax would be better served not by raising the top marginalrate but by reducing cash transactions by the rich self-employed as well as theextent of income shifting by company owners and managers who leave theirpersonal income within their company to exploit the rate gap between thepersonal and corporate income tax. Considering the immobile nature ofcorporate rents and the significant share of corporate taxes in the overallrevenue, this paper suggests, the statutory corporate rates need not to belowered hastily. In addition, overly generous tax subsidies toward small andmedium-sized companies need to be streamlined in ways to provide moresupport to start-ups and R&D activities.