Offshore tax dodgers targeted

By Na Jeong-ju

Kim Duk-joong NTS Commissioner

Tax authorities have launched an all-out war against offshore tax evaders.

The National Tax Service (NTS) is targeting millionaires and companies that are keeping assets in offshore tax havens, such as the Virgin Islands, Cayman Islands and Gibraltar ― all controlled by Britain. The NTS has dug up more than 200 suspected individuals and corporations and suspects there are many more.

The NTS and the Ministry of Strategy and Finance (MOSF) said Monday they were working closely to trace the hidden funds. The Tax Justice Network, a London-based civic organization, claims the amount that Koreans moved to tax havens from 1970 to 2010 totaled $779 billion, the third largest amount following China and Russia. That’s more than twice the government budget for this year.

The ministry said it has signed agreements with 17 countries that are popular for tax evasion to exchange information about Korean firms and individuals that have accounts there.

“Based on the pacts, we can ask the countries to provide information about those suspected of having dodged taxes,” said Ryu Kwang-joon, a ministry official. “The countries must comply with such requests under normal conditions and cooperate with our investigation.”

According to sources, the information sharing pacts with the Cook and Marshall islands have taken effect, but those with 15 other countries, including the Bahamas, Bermuda and Vanuatu, have not yet been implemented.

NTS officials said they are currently investigating more than 200 firms and individuals for using offshore tax havens to evade taxes. They refused to reveal their identities, citing obligations to confidentiality.

“What we only can say is the crackdown is now in progress, and back taxes will be levied on violators after the investigation ends under due process,” an NTS spokesman said.

The assets hidden abroad by Korean nationals have been drawing keen attention since Han Man-soo, a tax expert who had been nominated by President Park Geun-hye to head the Fair Trade Commission, quit last month after being dogged by allegations of tax evasion. He was accused of having millions of dollars in a secret account overseas without reporting it to the NTS.

Adding fuel to the fire, the U.S.-based International Consortium of Investigative Journalists (ICIJ) said last week it has obtained more than 2.5 million documents showing secret bank accounts belonging to high-profile, powerful people around the world in the British Virgin Islands.

They may include a number of Koreans. NTS officials said some 80 domestic firms have invested in the islands in the form of setting up paper companies or opening bank accounts.

The ICIJ said Sunday it has received requests from South Korea, Germany, Greece, Canada and the U.S. to share the data, but declined to do so.

“The ICIJ is not an arm of law enforcement and is not an agent of the government. We are an independent reporting organization,” its director, Gerard Ryle, said in a blog post.

The tax authorities said they will use all available means to discover secret funds hidden abroad by Koreans.

Last year, the NTS imposed some 1.1 trillion won in back taxes on about 200 people who stashed funds in Switzerland.

“That was possible because of increased collaboration with the Swiss government,” an NTS official said. “We will be able to collect more taxes from dodgers based on information exchanges with the countries used as tax havens.”