By Kim Jae-won
Staff Reporter
Since President Lee Myung-bak took office two years ago, one of the most important issues for his administration has been to boost the nation’s global brand. The government has made all-out efforts to embrace world cultures in every area, including business and diplomacy.
However, it seems that the country is slow in joining the global move to regulate illegal cross-border money flow, as the government has shown a lukewarm attitude toward making it obligatory for Korean individuals and firms to report their overseas bank accounts.
“The world is seeking to control illegal cross-border cash flow. However, the Korean government is far behind in the trend,” said Rep. Lee Hye-hoon of the Grand National Party (GNP) in an interview with The Korea Times.
The chairwoman of the Tax Subcommittee at the Strategy and Finance Committee of the National Assembly, submitted a revised bill in November, which makes it a rule to report overseas financial accounts.
Once the bill is passed, those with accounts of financial firms outside the nation must report them to the tax office of his residence once a year. Unless he or she follows this rule, the tax office can impose a fine of up to 100 million won for the violation.
“The revised bill will be a fundamental legal basis to prevent tax evasion at the international level,” the second-term legislator of the ruling party said.
“It will also help state agencies investigate suspected illegal cash flows. For example, Swiss banks require an account number of customers when investigators ask for information on their clients. The revision will enable officials to get access to such accounts.”
Lawmakers have discussed the bill several times since November, but they are still split over the revision.
“The bill is stuck. Colleagues have changed their minds. They had earlier agreed on the proposal, and even signed to support it a few months ago, but now they are opposing the legislation,” Rep. Lee said.
There are nine members in the Tax Subcommittee ― five from the GNP, including Lee; three from the Democratic Party; and the other from the Liberty Forward Party. Lee said that business lobbyists are standing in the way of the bill being approved.
“Lobbyists are moving to prevent the revision. Some of them visited me and asked to drop the bill,” the 45-year-old National Assemblywoman said.
Lee declined to reveal the names of such firms, but told why they oppose the bill. “They said the revised legislation can hurt their business. However, it is just an irrational excuse. They usually make slush funds overseas, and use it for the owners’ private purpose.”
She also criticized the finance ministry for delaying the draft. “They asked me to give them more time to draw up detailed rules last year, but nothing has yet to come out,” Lee said.
The finance ministry said that they are still studying the bill to come up with detailed regulations.
“We will ask local think tanks to look into the issue in March. After that, we may finalize our suggestions and submit them to the National Assembly,” Eun Hee-hoon, a deputy director of the ministry, said.
Lawmaker Lee said that slush fund scandals associated with Hyosung Group was the initial trigger for her push for the revision on the law.
Hyosung has been under investigation by the Prosecutor’s Office since last year over allegations it created a slush fund through its subsidiaries in the United States. The children of the owner, Cho Suck-rai, were said to have used the stashed money to purchase real estate overseas.