Overseas tax evaders face intense audits

Finance Minister Hong Nam-ki, fourth from right, and National Tax Service Commissioner Han Sung-hee, third from right, put their hands on their chests along with other high-ranking tax agency officials while pledging allegiance to the Korean national flag at the beginning of a meeting at the National Tax Service in Sejong, Jan. 28. Yonhap

By Lee Kyung-min

The National Tax Service will conduct more stringent investigations into suspected tax evasion involving overseas entities, it said Monday.

This is part of a broader effort to ensure fair taxation by prompt identification of the tax avoidance and evasion methods that have been becoming more efficient and successful over the past few years.

“Fair society and fair competition are and will remain our motto,” an NTS official said during the briefing at Sejong administrative city.

“Multinational companies engaging in tax avoidance is not merely simple tax evasion but rather a clever way of exploiting existing loopholes in the current legal system. We will continue to watch and move in line with global efforts to tackle base erosion and profit shifting (BEPS).”

BEPS refers to tax avoidance strategies that exploit gaps and mismatches in tax rules through artificially shifting profits to low- or no-tax locations.

Under the initiative led by the OECD, over 100 countries and jurisdictions are collaborating to implement measures to tackle this issue.

Intense scrutiny targets those who fail to report overseas property including financial accounts and real estate.

Also those who raise and retain slush funds using accounts under overseas corporate entities will be investigated. Those who aid and abet illegal tax evasion efforts will be also subject to harsher punishment.

Deliberate attempt to underreport income or property prices, as well as abuse of tax treaties will be monitored.

Multinational companies including IT giants will come under particularly tighter scrutiny. A comprehensive data analysis system will be set up to monitor the income and sales of such companies.

A separate data management system will be set up to identify overseas assets of tax dodgers living here.

Meanwhile, the NTS plans to audit large enterprises with annual sales of over 150 billion won ($134 million) to look into whether owners (or suspected de facto owners) engaged in illegal transfer of assets involving family members or those that share financial interests with them.

“The measure is to ensure equitable opportunity for all in accessing wealth. However, we do not plan to conduct the regular audits this year more than we did last year,” the official said.