South Korea is strengthening supervision of foreign exchange transactions as South Korean 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 South Korean Ministry of Finance said in an e-mailed statement yesterday.
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.
British Prime Minister David Cameron on Saturday 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 G8 that begins today.
Finance ministers from the G20, 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.
Park aims to raise 135 trillion won (US$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 Ministry of Finance.
The Financial Supervisory Service (FSS) in Seoul recently launched a task force to investigate about 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 last year, Bloomberg BNA reported on Friday.
The tax authority said 45 more cases are under investigation, Bloomberg BNA said.
Rewards for whistle-blowers who give details on hidden foreign accounts will jump as much as tenfold to 1 billion won, Bloomberg 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, Bloomberg BNA said.
At a meeting with top executives of foreign banks, insurers and brokerages in South Korea, FSS Governor Choi Soo-hyun 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 on Thursday.
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 Friday said the country should join the international push against tax dodgers by allowing banks to share customers’ details.
Switzerland faces pressure from the EU 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 US Department of Justice probe of at least 14 financial firms, including Credit Suisse Group AG and Julius Baer Group Ltd, which allegedly helped Americans dodge taxes.