[EDITORIALS]Tax probes should be fair, equalThe sudden launch of a National Tax Service investigation of two foreign private equity funds is arousing criticism and concern. The criticism is that this probe is intentionally targeting certain foreign investors. The concern is that such a move could prove an obstacle to the influx of foreign capital in the future.
Some people are lumping this investigation together with the financial supervisory authorities’ recently tightened requirements about reporting the sources of investment capital, and are criticizing Korea for returning to nationalism.
In fact, there has been some public antipathy toward foreign funds that have paid no taxes here on their hefty profits from investments in Korea since the 1997-98 foreign exchange crisis. There was some opinion among the public that the nation’s tax authorities should take countermeasures. No tax probe to “tame” foreign funds, backed by that kind of public sentiment, should be conducted by the National Tax Service.
But if there are suspicions that tax evasion occurred, then it would also be improper to overlook such suspicions, and to give up the right to tax, simply because those under suspicion are foreigners. “Where there is income, there is tax” is the basic principle of taxation. If foreign funds have generated income here, then they basically have a duty to pay the income tax here.
Of course, the nation’s right to impose taxes could be transferred to another country, if ―as appears to be the case here ―that country has a double-taxation pact with Korea. But the tax authorities can investigate whether the pact really applies to these cases or not.
What is most important is whether the criteria in launching tax probes are applied equally to domestic and foreign capital. True globalization will occur when there is discrimination against neither.
If the National Tax Service finds that the foreign funds in question have broken no local laws, then it will be improper to regard the profits of foreign capital, however huge, as a drain on the national wealth, and to provoke useless antipathy toward them. If our taxation system has loopholes, then we should repair them first. In selecting the targets of tax probes and conducting the investigations, the National Tax Service should be sure to act in accord with global standards, thereby avoiding unnecessary misunderstandings.