Korea turns blind eye to OECD tax havens

Only three of the 30 nations designated as tax havens by the Organization for Economic Cooperation and Development are identified as such by the Korean government.

According to the National Tax Service and Rep. Cha Myung-jin of the Grand National Party, only Andorra, Liechtenstein and Monaco are designated as tax havens by the Korean government.



Under current laws, tax havens are defined as jurisdictions that do not levy taxes on all or large parts of a corporation`s earnings and jurisdictions where the levied tax is less than 15 percent of the taxpayer`s actual earnings for that year.

Although the Korean government`s list of tax havens drawn up in 2006 had also included Liberia and the Marshall Islands, tax haven designation was lifted from the two last year.

Although government officials said that taxes are levied on income generated overseas under specific conditions regardless of whether or not the income was generated in jurisdictions classified as tax havens, Cha claims that the Korean government`s measures concerning tax havens contradicts international trends.

"The government is going against the trend of increasing international cooperation concerning tax havens to prevent tax evasion and laundering of illegal political funds," Cha was quoted as saying by Yonhap News.

"Although all 30 jurisdictions announced by the OECD can`t be designated as tax havens, strengthening monitoring activities on the regions and designating more tax havens can help prevent tax evasion and amassing of illegal funds."

According to the OECD`s report on the status of the internationally agreed tax standards released on April 2, 30 jurisdictions are designated as tax havens as they have committed to the standards but have not substantially implemented the measures. Aside from the three tax havens recognized by the Korean government, the OECD`s list includes the Bahamas, British Virgin Islands, Gibraltar and Liberia.

In addition, eight countries including Austria, Belgium and Switzerland that have not substantially implemented the measures were categorized as "other financial centers."

The report also shows that Costa Rica, Malaysia, Philippines and Uruguay have not committed to international tax standards.

In total, 42 countries and regions are included in the OECD`s list of jurisdictions that do not fully conform with the Article 26 of the OECD Model Tax Convention on Income and Capital that states the conditions concerning exchange of information and that governments are obliged to provide requested information even if such actions contradict local laws.

By Choi He-suk



(cheesuk@heraldm.com)