Agencies scramble for FIU’s secrets
In a report to President Park at the Blue House, Hyun Oh-seok, deputy prime minister for the economy, said the finance ministry will focus on downsizing and tapping into the country’s underground economy by strengthening taxation rules.
The ministry will utilize the Financial Services Commission’s Financial Intelligence Unit (FIU), which stores information on individuals’ financial transactions to find illegal tax evasion and hidden assets of taxpayers.
Information on financial transactions exceeding 10 million won falls under the jurisdiction of the FIU. Park’s political allies claim the government should be able to access the FIU’s database to root out hidden financial information and expose tax evaders. Currently, only the FSC has access to the data compiled by its FIU.
The National Tax Service and other government agencies have no access.
In June, the government will push to reform the current law regulating the FIU, which restricts access to the information. It wants the NTS to tap it to find more tax sources. The Korea Customs Service, which recently declared war on tax evasion by multinational companies, also wants access.
If the FIU law is revised, financial transactions by large shareholders of conglomerates - especially those who transfer shares and don’t pay the appropriate taxes - will be caught on the government’s radar.
The main goal is to downsize the country’s shadow economy, which is estimated to be as large as 25 percent of GDP, to 10 to 15 percent.
From June, the minimum level of cash payment that requires reporting to tax authorities will be lowered to 100,000 won from 300,000 won. Top earners like lawyers, doctors, private cram schools, wedding halls and liquor businesses must issue receipts for cash payments over 100,000 won. The ministry will expand the rule to include jewelry shops and moving companies.
The government will also lower the level of business-to-business transactions that require issuance of electronic tax invoices to 300 million won a year from 1 billion won.
The Finance Ministry believes the first 100 days of a new government are crucial to establishing a policy foundation for the next five years.
It unveiled yesterday a so-called 100-day action plan that includes 15 major tasks to revitalize the economy and improve the livelihoods of the working class.
The action plan includes strengthening assessments on public corporations, raising the employment rate to 70 percent, enhancing control of the foreign exchange market, promoting establishment of cooperatives, stabilizing inflation from a structural perspective and easing household debt levels.
Early next month, the ministry will come up with a plan to adjust spending in the government budget for this year to cut total government spending by 82 trillion won for the next five years.
The ministry thinks that slashing budgets for this year’s projects and putting through a supplementary budget will help raise GDP growth to 3 percent. The finance ministry released a 2.3 percent growth forecast last week.
“The economy could grow at near 3 percent in second half of the year if the government utilizes various measures like its new real estate policy, the supplementary budget and spending cuts,” said Choo Kyung-ho, vice finance minister at a press conference.
To achieve the president’s goal of reaching an employment rate of 70 percent for the entire population, the ministry is planning to upgrade about 45 percent of contract-based workers at public institutes into permanent employees by 2015. According to the ministry’s estimate, there are about 45,000 contract-based workers at 295 public institutes. The institutes will also hire around 2,100 high school graduates this year, 10 percent more than last year.
By Song Su-hyun [firstname.lastname@example.org]
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