S. Korea ramps up efforts to detect offshore tax evaders

SEOUL, June 13 (Yonhap) -- South Korea is stepping up efforts to ferret out people and businesses engaged in offshore tax evasion schemes by directly investigating foreign financial accounts, the tax office said Monday.

The National Tax Service (NTS) said it will carry out the investigations in cooperation with tax authorities in foreign countries that have been cited for becoming tax havens for Korean nationals and companies. Individuals and companies establish overseas paper companies and foreign accounts to hide wealth and earnings to avoid paying local taxes.

The NTS said agreements have been reached with Switzerland and Malaysia to better exchange information on financial data, with negotiations underway with Hong Kong to permit information cooperation for the purpose of finding illegal tax evaders. The service said it wants to sign a formal agreement with the special administrative region by year's end.

South Korea already has tax-related data sharing pacts with Panama, the Cayman Islands and the Virgin Islands.

"The ability to check both local and foreign accounts comprehensively can greatly improve the ability of the tax office to ferret out illegal activities and take legal actions as well as slap penalties," the NTS said.

The move to expand tie-ups with foreign tax authorities comes in part as local investigators experienced problems carrying out probes against such businessmen as Kwon Hyuk, chairman of Cido Maritime Corp., and Cha Yong-keu, an entrepreneur accused of evading taxes despite making money in the sales of stakes in Kazakhstan's largest copper mining company.

Both Kwon and Cha are suspected of having secret bank accounts in Switzerland that could contain information shedding light on their earnings and money transactions, while cooperation with Hong Kong can help the NTS check claims made by the Cido chairman.

Kwon, who has operations in Hong Kong, said he received almost no dividend earnings so there was no way for him to amass wealth to pay taxes.

The move by the tax office to detect overseas accounts, meanwhile, coincides with steps by the Organization for Economic Cooperation and Development (OECD) and other countries around the world to deal more aggressively with tax evasion schemes following the 2008 global financial crisis.

The OECD compiled a "black list" in 2009 of countries accused of helping tax evaders, with the Group of 20 most industrialized countries threatening to take economic sanctions against them. Since then, listed countries have cooperated with foreign governments to crack down on tax evasion.

yonngong@yna.co.kr
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