Korea Tax: The National Tax Service (NTS) steps up efforts to fight offshore tax evasion

by Kim Jae-won, 10 May 2010 -- Korean tax authorities are turning their attention more closely to offshore tax evasion by Korean as well as multinational firms, with the plan of launching a special team of investigators on a permanent basis.

The decision to launch the team, with a staff of more than 15, comes on the heels of the appointment of an international finance specialist who worked for Barclays Securities.

The National Tax Service (NTS) Monday said that the team was started as a task force on a temporary basis late last year but a decision was made to turn it into a permanent part of its apparatus, considering the ever-sophisticated nature of tax evasion. It will be formally launched as soon as the government gives its clearance.

The formation of the task force was widely seen to be motivated by allegations that Hyosung, a mid-sized conglomerate, engaged in creating slush funds through its overseas operations. Hyosung Chairman Cho Suck-rae is related by marriage to President Lee Myung-bak.

"We needed the task force to be a permanent part of our efforts to fight offshore tax evasion," said Kim Deok-joong, the National Tax Service's assistant commissioner for strategy, explaining the change in the nature of the team.

In November, the agency launched a 15-member team. The team will likely keep its name, the Overseas Tax Evasion Report Center. National Tax Service officials said that the staff will likely be beefed up.

"It is important to plug holes caused by tax evaders, especially those using offshore channels," Kim said, adding that the team will help achieve the impartiality of taxation.

"We also expect to expand international cooperation with other countries' tax officials," he said. "The new team will help us on this front."

The National Tax Service joined the Joint International Tax Shelter Information Center in March 2009, compiling cases of overseas tax evasion trends.

The National Tax Service has just hired an international finance expert as a move to strengthen its investigations into offshore tax evasion.

NTS' counselor for international finance, Lim Woo-taek, 49, served as managing director of C&F Capital. Lim used to work for the Seoul office of Barclays Securities as general manager from 1994-1997, and prior to that, had a stint at KGI Securities, a Taiwan-based brokerage.

The NTS' efforts at looking overseas is similar to that of the United States, which also launched a special team of the Internal Revenue Service (IRS), focusing on rich billionaires suspected of hiding assets overseas.