Tax chief tries calming Big Biz on crackdownKorea’s National Tax Service Commissioner Kim Duk-joong vowed to crack down on offshore tax evasion.
The commissioner said yesterday at a breakfast meeting of the Korea Chamber of Commerce and Industry (KCCI) that the tax agency will actively pursue people who conceal income in foreign tax havens by disguising themselves as nonresidents or illegally transfer money in the guise of foreign investment.
However, Kim said businesses that engage in legitimate foreign investments and trade transactions should not be concerned about his hard-line tax policy.
“About 90 percent of tax revenues come from corporate income tax, value added tax (VAT) and voluntary tax payments, while only 3 percent comes from taxation through investigation,” he said. “As a result, in order to secure tax revenues, improving corporate earnings through economic revitalization is more important than wielding administrative power.”
The tax agency is trying to dispel fears of its crackdown on offshore tax evasion and illegal private loan businesses. It has said it is trying to crack down on the underground economy to boost tax revenues to pay for President Park Geun-hye’s election promises, particularly on welfare spending.
“Rumors are rampant that the NTS is bolstering tax audits in all business areas while it attempts to normalize the underground economy by using the financial information of the Financial Intelligence Unit (FIU),” he said. “However, that is an exaggeration considering the limited number of investigative personnel of the NTS.
“Although it is true that the NTS initially proposed to get direct access to FIU information, the FIU law has been amended so that the intelligence unit could provide companies’ information only when there are suspicions of tax evasion,” he said.
The commissioner said tax audits will only be conducted in certain areas where tax evasion is common.
“Audit will mainly focus on four major areas of tax evasion announced by the NTS,” he said. “The subjects are tax evasion by large corporations and large private fortunes, tax dodging by high-income, self-employed people, tax dodging through abuse of people’s livelihood such as manipulating stock prices and selling fake petroleum, and offshore tax evaders.”
Meanwhile, the KCCI proposed the NTS commissioner avoid retroactive gift taxes on large corporations.
“In the midst of the economic slowdown, companies are concerned that investment and employment would shrink in the process of excavating the source of taxation,” said Sohn Kyung-sik, chairman of KCCI. “We hope that honest companies will not be harmed by excessive taxation or tax audits.”
At the meeting, about 30 entrepreneurs attended including Doosan Group Chairman Park Yong-man; Lee In-won, vice chairman of Lotte Shopping; Lee Sang-hoon, chief finance officer of Samsung Electronics; and Byun Yong-hee, president of STX.
By Kim Jung-yoon [email@example.com]