Posted April. 13, 2011 02:49,
Updated November. 30, -0001 00:00
Countries are stepping up crackdowns on offshore tax evasion, through which people or companies smuggle out wealth to dodge taxes. The U.S. has prepared guidelines requiring foreign banks to inform the Internal Revenue Service of the profiles of Americans who deposit 500,000 U.S. dollars or more each. Germany and France have purchased customer information from Swiss banks, which used to be a safe haven of confidential bank accounts, and are using the data to fight tax evasion. Tax authorities worldwide are collaborating beyond their borders to catch tax dodgers.
The most representative type of offshore tax evasion is for a taxpayer to disguise himself or herself as a non-resident or a foreign-invested company that is not subject to taxes and smuggle money abroad. Many also evade taxes by fabricating contracts in the process of importing and exporting. Another method is for a national to smuggle out wealth in the name of overseas investment without undergoing due process. With money flow between countries becoming easier due to globalization and digitization of capital, it has spawned the side effect of globalized tax evasion. If a country can bring black money to light, it can increase tax income and reduce the burden of taxpayers who faithfully pay their taxes.
The National Tax Service said it caught 41 cases of offshore tax evasion this years first quarter and levied 474.1 billion won (434 million dollars) in penalties. Cido Shipping CEO Kwon Hyuk was penalized 410.1 billion won (376 million dollars), including general income and corporate taxes, and charged with evading taxes on an income of 800 billion won (733 million dollars). Tax authorities say Kwons case is typical of offshore tax evasion. He is known to have disguised himself as a resident of a foreign country and his company as a foreign company despite conducting business in Korea and smuggled out money to foreign banks. The shipping company denies the charges, however, saying, CEO Kwon is a foreign resident and Cido Shipping a foreign company and are not subject to Korean taxes, indicating an appeal to the tax agency`s decision.
The National Tax Service is confident of having secured sufficient evidence against Kwon, but his side is determined to overturn the results of the audit through a countersuit. Kwon has engaged in many activities deemed not fully logical and traceable according to common sense, but it is premature to predict the conclusion because an offshore tax evasion suit is complicated. Kwon said he has not paid taxes to Korea but has been paying taxes to Hong Kong. Tax authorities must use caution to assure that unjust penalties are not levied due to excessive ambition while trying to impose stern punishment on offshore tax evaders.
Editorial Writer Kwon Sun-hwal (email@example.com)