Korean tax authorities are gearing up for a full-scale probe into those holding offshore accounts via paper companies created in tax havens exposed by non-profit news organizations.
Investigations into the accounts held by notable family members connected to family-run conglomerates such as Korean Air, OCI and Hyosung will likely begin by uncovering the truth and purpose behind establishing such shell companies.
It is too early to tell whether they are illegitimate as not all companies or management trusts are set up in havens to evade taxes. However, those who fail to report to the government of their overseas assets will be subjected to prosecution.
Members of a civic group hold a rally at the National Tax Service headquarters in Seoul on Thursday to call for a tax probe into those who are suspected of holding secret offshore accounts. (Park Hae-mook/The Korea Herald)
The National Tax Service said it will examine the feasibility of the data disclosed by the independent news organizations.
The Korea Center for Investigative Journalism, or KCIJ, in collaboration with the International Consortium of Investigative Journalists, only unveiled the number of Koreans ― 245 ― who held tax haven accounts via ghost companies, but not the characteristics of their operations.
OCI admitted that its chairman did have a personal tax haven account, but no longer as he transferred the funds to his U.S. account, while Korean Air and Hyosung said their owners’ relatives who were found to operate paper companies have nothing to do with their businesses.
It will counter any suspicions by the book, the tax agency said.
“We know for sure that Koreans have accounts in the British Virgin Islands,” said an NTS official. “The agency will look into the matter according to principles.”
This comes after NTS Commissioner Kim Duk-joong said early that the tax agency will analyze the list of Koreans with tax haven operations and deal with any suspicions by the rules.
The commissioner previously mentioned that uncovering those who may have stashed money in offshore accounts hidden from the government is one of its top priorities along with normalizing the underground economy during the administration of President Park Geun-hye.
A group of civic organizations also held a rally in front of the NTS’ headquarters in the day to call on tax authorities to conduct a thorough investigation into holders of secret offshore accounts in tax havens and punish those who are found to be tax evaders.
The country’s efforts to bring tax dodgers to justice are expected to gain momentum on the back of support from civic groups and political circles urging for fairness and transparency.
Also, global economies are seeking to combat and curb tax evasion with British Prime Minister David Cameron, the chair of the next G8 summit in June, calling for “order” in tax havens.
This will be on the top of the G8 agenda as taxation would be one of last resorts to sustain government spending amid the global slowdown, while facing limits to boosting export growth through currency debasement.
On Wednesday, the KCIJ, also known as Newstapa, and ICIJ announced the first batch of Korean names who owned offshore accounts in tax havens, adding that most of the 245 Koreans are believed to be well-known corporate executives and chaebol. The list included politicians as well, they claimed.
By Park Hyong-ki and Chung Joo-won
(hkp@heraldcorp.com) (joowonc@heraldcorp.com)