Offshore schemes eating away national wealth
Tax authorities have just begun to make some progress in a fight against tax evaders who stashed away massive wealth abroad. The National Tax Service (NTS) recently uncovered the country’s largest single offshore tax evasion scheme and imposed 410 billion won ($372 million) in penalty taxes on a tycoon possessing more than 10 trillion won ($9 billion) in assets.
The levy of the punitive taxes on the chairman of a shipping firm shows how easy it was for businessmen to siphon off their company funds to foreign tax havens. The CEO evaded taxes by setting up ghost firms in Hong Kong, Panama and the Cayman Islands.
He hid his firm’s profits of nearly 1 trillion won earned from operating a fleet of 160 vessels over the last five years in bank accounts in Switzerland and other tax havens. He even behaved as if he were a foreign businessman who can enjoy a no-tax status here.
His scheme has now come to an end in the wake of the NTS crackdown. However, his case is only the tip of the iceberg. A large number of more wealthy individuals and businesses are believed to have racked their brains not to pay due taxes. They have become more sophisticated in plotting tax evasion to survive the crackdown.
The war on tax dodging was started last year as part of President Lee Myung-bak’s campaign to usher in a fair society. The nation cannot become a better place to live unless it ensures equal opportunities and the rule of law. Fair taxation is pivotal to achieving Lee’s drive. That’s why the NTS launched the campaign agaisnt tax evasion in 2010. Especially it has vowed to clamp down on those seeking a tax haven abroad.
The NTS has set the target of imposing 1 trillion won ($909 million) in penalty taxes on evaders using offshore tax havens in 2011. It slapped 474 billion won ($430 million) on evaders, including the shipping tycoon, in the first three month of this year. This demonstrates how widespread and systematic tax evasion rich people and businesses have engaged in.
The public cannot but feel a sense of deprivation upon hearing the news of the schemes. It goes without saying that tax evasion is a violation of obligations stipulated in the Constitution. It not only shrinks the nation’s budgetary capacity but also has negative implications on economic activities, hampering the redistribution of wealth.
More to the point, tax evasion through offshore tax havens inevitably results in the flight of national wealth. It is a matter that goes beyond evaders’ greed for money and their unethical standards. The government can no longer rely on businessmen’s morality or patriotism to meet their tax obligations. It’s time to introduce an effective legal and institutional framework to prevent any form of tax evasion.
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