By Kim Jae-won
Staff Reporter
Hong Kong is one of the most beautiful cities in the world with its name meaning "fragrant port," but there is a smelly part of the city ― the tax evasion base for Koreans.
Many Koreans use the port city to avoid taxes and create slush funds, the national tax agency said.
"Brokers in Hong Kong have provided schemes for offshore tax evasion. They even provide customer-specialized schemes on how to hide corporate and slush funds in the tax haven," Park Yun-jun, assistant commissioner of the National Tax Service (NTS) said.
The city had kept financial policies secret to protect their businesses and customers.
"We will do our best to investigate these aggressive tax planning (ATP) cases," Park said.
Hong Kong has been given this business on its merits as a financial hub.
"It is true that many overseas tax evasion cases occur in Hong Kong because the city is an Asian financial hub. There are many tax evasion specialists in the city's financial institutions," another official of the agency, who declined to be identified, said.
The NTS found 45 cases over an eight month period from June 2008 to February, and levied fines of 177 billion won.
The official admitted that many cases occurred in the city, but there was a limit to investigations because Hong Kong refuses to exchange information on taxation with Korea.
The brokers are financial specialists, such as lawyers, accountants and bankers.
"Law firms and financial institutions provide such illegal services. They teach methods of tax evasion," the official who is in charge of the investigations said.
Thirty-five of the cases were paper companies, disguised to be foreign investment companies.
They bought real estate there under the name of the company's owner's family members to avoid gift taxes.
"Those charged have various backgrounds. They're definitely rich people and some of them are company owners," the official said.
Meanwhile, Singapore, a rival financial hub, signed a pact with France to bring its bilateral tax treaty in line with the requirements of the Organization for Economic Cooperation and Development (OECD)'s standard on tax transparency and information exchange last week.