By Kim Jae-won
The nation’s tax agency has signed an agreement with its American counterpart to join forces to crack down on offshore tax evasion and illegal wealth transfers abroad, the National Tax Service (NTS) said Tuesday.
Under the agreement signed a month ago, the two countries will work together to investigate tax criminals by sharing information on suspects, their associated parties and promoters engaging in economic activities based in both Korea and the U.S.
According to the agency’s documents acquired exclusively by The Korea Times, the NTS signed an accord on the Simultaneous Criminal Investigation Program (SCIP) with the Internal Revenue Service (IRS) on Aug. 11, in order to better address offshore non-compliance activities and the illegal transfer of assets outside Korea.
“The objectives of the SCIP are to conduct investigations of individuals and/or companies involved in substantial tax violations in the United States and other foreign countries,” the IRS said on its official website.
“They aim to eliminate the problems caused by taxpayers using the border to avoid production of records and reporting of income,” the U.S. tax agency added.
The agreement with the U.S. is Korea’s first of its kind with a foreign tax agency. Korea is the U.S.’s fifth partner on joint tax investigations, following Italy, Canada, France and Mexico.
The IRS Criminal Investigation Division, the operating arm of SCIP, has access to a wide range of financial information and has strong investigative authority. The program will, therefore, help the NTS to better detect and trace non-complaint activities, such as private use and embezzlement of corporate funds using U.S.-based vehicles.
The agreement comes as local conglomerates and professionals have become the target of criticisms for tax evasion using overseas transfers, especially to the U.S. For example, Hyosung Group has been under investigation by the prosecution since last year over allegations it created a slush fund through its subsidiaries in the United States.
The children of the Hyosung owner allegedly used the money to purchase real estate overseas.
Analysts said the U.S. aims to use its agreement with Korea as leverage to encourage China to strike a similar treaty.
“For the U.S., China is a more attractive country to have the SCIP agreement because many U.S. companies and citizens evade taxes in Hong Kong,” a local tax specialist said on condition of anonymity.
“However, China does not want to have an agreement with the U.S. out of fear of losing secret information. The U.S. may pressure China to strike a similar agreement referring to the Korean case.”
The tax specialist said the U.S. may target Korean-Americans who have assets in Korea for tax evasion.
“The IRs may request financial information on Korean-Americans. Many of them have real estate and bank accounts in Korea, so the IRS can check information on those who are suspected of tax evasion.”
1![[LIFE'S OLLE TRAILS 1] How hiking Jeju's 437km of trails changed my life](https://img.koreatimes.co.kr/upload/thumbnailV2/76a9bfb384714b8d8bb0078962a18259.jpg/dims/resize/178/optimize) | LIFE'S OLLE TRAILS 1How hiking Jeju's 437km of trails changed my life |
![[INTERVIEW] 'One Day Off' star Lee Na-young, director on creating subtle, feel-good series](https://img.koreatimes.co.kr/upload/thumbnailV2/796618f56a44402eabe81fe4530ab988.jpg/dims/resize/178/optimize)
