Korea Seeks to Get Banking Information From Switzerland

South Korea plans to finalize a clause on the exchange of financial information with Switzerland in July as part of its efforts to crack down on tax evaders resorting to the European state's banking secrecy. If the two countries strike a deal as planned, the tax authorities in Seoul would have access to details about Swiss bank accounts of tax evasion suspects starting early next year. It is certainly encouraging news that the nation may be able to effectively fight against those seeking a tax haven overseas.

Such an agreement is now possible after leaders of the G20 requested Switzerland to end the era of its banking secrecy during their meeting in London last April. Now, the country commits to extending administrative assistance regarding all tax offenses, including tax evasion. It has already signed a deal on information exchange with the U.S. and France. In August 2009, UBS, the global banking giant of Switzerland, decided to hand over information of about 4,450 of its clients to the American tax authorities.

In this context, it is natural for Seoul and Bern to have a similar deal and enforce it to prevent anyone from hiding their money by taking advantage of bank-client confidentiality. Korea signed a tax treaty with Switzerland in 1981. But the nation has been barred from imposing taxes on assets of Koreans that are transferred into bank accounts in the member state of the European Union.

Due to the stringent Swiss regulations, Korean officials have so far done little to confirm allegations that wealthy businessmen and corrupt politicians, including a few former presidents, might have deposited large sums of funds into secret Swiss accounts. Now we hope that the two countries will successfully conclude their negotiations without any delay in order to step up their efforts to battle tax evasion and tax fraud.

The adoption of the financial information exchange clause would be a first step toward bilateral collaboration in ensuring greater transparency in financial transactions with little room for depositors to evade taxes. But it would not serve as a one-size-fits-all solution to the problem. It may not grant Korea full rights to view Swiss bank accounts indiscriminately. The possible agreement would not necessarily provide the automatic disclosure of information.

More important is that Korea should establish a tighter system designed to keep its citizens, though only a small group of rich but corrupt people, from trying to hide their money and seek a tax haven abroad. Many still call into question the will of the government to do its best to stop the outflow of dubious funds to secret bank accounts in some foreign countries. Some raise the question of why the Korean government made public its talks on the information exchange with Switzerland. Is it a message to tax evaders that they had better withdraw deposits from their Swiss accounts and transfer them to a safer place?