S Korea suspects tax fraud at funds

South Korean tax officials probing suspicions of tax evasion have raided the offices of several foreign funds that invest billions of dollars here, financial sources said yesterday.

Auditors the National Tax Service (NTS) have been carrying out sweeping probes into seven foreign funds since Tuesday, reports said.

NIS and foreign funds declined to comment on the reported tax audit but financial industry sources confirmed tax officials have seized documents from several foreign groups.

Yonhap agency said the seven foreign funds reportedly targeted include US-based Newbridge Capital, Carlyle Group and Lone Star as well as the Government of Singapore Investment Corp (GIC).

The tax probe comes amid growing complaints among foreign investors that South Korea is taking a hostile policy towards them and offshore entities who are based in tax havens and use tax treaties to avoid tax legally.

Seoul new regulations last month under which any shareholder acquiring more than 5 percent of a company here is required to disclose whether they intend to influence the company's management.

All investors also have to declare their legal status and management structure, the name of their largest backers and how they raised the capital for their investment.

Foreign investors say the new requirements are aimed at tightening control on them but South Korean officials say they are to be applied fairly to both domestic and foreign investors, and is aimed at enhancing transparency.

Defenders the foreign funds say they took on high-risk investments at a time when South Korean investors were unwilling to do so and saved or created thousands of jobs and boosted the country's economy.