Korea removed from EU’s list of tax havens

Korea was removed from the European Union’s “blacklist” of tax havens Tuesday after the government committed to changing its tax practices.

Other jurisdictions that left the list include Barbados, Grenada, Macau, Mongolia, Panama, Tunisia and the United Arab Emirates.

The decision was made by a so-called Code of Conduct Group comprising tax experts from 28 EU countries and came more than a month after the European Union unveiled the list.

In December, Korea was one of 17 territories labeled by the EU as tax havens. The EU said Korea was a “non-cooperative tax jurisdiction” that played a role in tax avoidance and evasion. It noted that Korea’s tax breaks for foreign investors in special economic zones were hurting European companies.

The news was a surprise to the Korean government, but Finance Minister Kim Dong-yeon said he did not see the issue as serious because Korea was meeting other international standards like those set by the OECD.

Still, Kim said his government was open to working with the EU and meeting its requests to get delisted.

The EU’s tax haven blacklist, its first ever, was created to discourage tax dodging. The Korean government has been providing income and corporate tax breaks of 50 to 100 percent to companies that establish operations in free economic zones. The tax breaks last five to seven years after they set up business in Korea.

The benefits particularly expanded following the Asian financial crisis in 1997. Korea saw large amounts of foreign investment pouring in afterward, but Finance Minister Kim has openly questioned the need for such benefits, which he has called outdated.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]