South Korea is strengthening supervision of foreign exchange transactions as President Park Geun Hye broadens her country’s part in a global crackdown against tax evasion.
The Financial Supervisory Service and Korea Customs Service will have enhanced rights to investigate cross-border transactions at companies, the Finance Ministry said in an e-mailed statement today. Failure to report details of funds wired, assets acquired or the annual balance in investments may be subject to fines, the statement said.
Policing tax evasion has crept up the political agenda worldwide as governments struggle to pay for social programs amid high unemployment and weak economic growth. U.K. Prime Minister David Cameron yesterday said tax havens under Britain’s legal supervision pledged to fall in line with international agreements on exchange of information, a key topic at a meeting of the Group of Eight nations that begins tomorrow.
Finance ministers from the Group of 20, which includes South Korea, are considering plans for exchanging tax information, Russian Deputy Finance Minister Sergei Storchak said on June 7 after a meeting of his counterparts in St. Petersburg. Tax was “about the hottest issue,” he said.
South Korea’s Park aims to raise 135 trillion won ($120 billion) without increasing tax rates to fulfill her welfare pledges. Of that, 53 trillion won will come from cracking down on the underground economy, according to the finance ministry.
The Financial Supervisory Service in Seoul recently launched a task force to investigate some 2,000 undeclared foreign exchange transactions uncovered since 2011.
The National Tax Service collected 479.8 billion won in back taxes on cross-border tax cheats in the first five months of the year, compared with 825.8 billion won for all of 2012, Bloomberg BNA reported yesterday. The tax authority said 45 more cases are under investigation, BNA said.
Rewards for whistleblowers who give details on hidden foreign accounts will jump as much as tenfold to 1 billion won, BNA said. The government will also start a naming-and-shaming campaign for individuals and corporations failing to declare more than 5 billion won in foreign account assets. The same violations will trigger criminal penalties next year, BNA said.
At a meeting with top executives of foreign banks, insurers and brokerages in South Korea, Choi Soo-hyun, governor of the FSS, called for “strict compliance” with reporting obligations concerning shell corporations set up by South Korean taxpayers in offshore tax jurisdictions, the agency said in a statement June 13.
The focus on offshore havens is ratcheting up pressure on governments to end or ease their traditions of secrecy or risk being labeled rogue jurisdictions and facing sanctions.
A Swiss government-appointed panel on June 14 said the country should join the international push against tax dodgers by allowing banks to share customers’ details.
Switzerland faces pressure from the European Union to join a system that automatically shares bank-account data. That would end a tradition of banking secrecy as the government tries to resolve a U.S. Justice Department probe of at least 14 financial firms, including Credit Suisse Group AG and Julius Baer Group Ltd., which allegedly helped Americans dodge taxes.
Switzerland is broadening anti-money laundering definitions to include serious tax crimes.
Britain’s network of overseas territories and dependencies agreed to Cameron’s request that they adopt extended transparency rules aimed at preventing tax evasion.
The islands around Britain known as the Crown Dependencies -- Jersey, Guernsey and the Isle of Man -- joined the British Virgin Islands, Bermuda, Cayman Islands, Gibraltar, Anguilla, Montserrat and the Turks and Caicos Islands in agreeing to support an automatic exchange of information begun by the U.K., Germany, France, Italy and Spain.
They also agreed to join the Multilateral Convention on Mutual Administrative Assistance on Tax Matters, and to publish plans on how they will force companies to reveal “beneficial ownership” -- the details of who is really behind a firm. Cameron has put securing wider agreement on these matters at the heart of his agenda for the G-8 he’s hosting in Northern Ireland June 17-18.
“It is important we are getting our house in order,” the prime minister said in a statement after the talks at his office in London. “Britain’s voice in the G-8 and the campaigning on this issue around the world for proper taxes, proper companies and proper laws will be stronger.”