Tax agency finds 1.8 trillion won of foreign funds invested in local stocks
The National Tax Service is pushing for a discussion with Swiss tax authorities to widen the scope of information sharing needed to crack down on alleged tax dodging by overseas Koreans with bank accounts there.
The agency was confirmed to have found more than 1.8 trillion won ($1.64 billion) of foreign funds invested in local stocks earlier this week. The investigation into the funds, believed to have arrived here in the form of roundtrip investments from bank accounts in Switzerland, requires the Seoul agency to access transaction details held by Swiss authorities.
“The tax treaty with Switzerland will go into effect in 2012 but we’ll still be bound by terms set. We would have to point out a specific investor for details about the bank accounts and this greatly limits our investigation into offshore tax evasion,” a NTS official was quoted as saying.
“The NTS will try to talk to Swiss authorities to allow Seoul to access transaction details about capital invested in stocks here,” he said.
The need for wider access to bank accounts in Switzerland became crucial after it returned 5.8 billion won in taxes to the NTS this week, which it imposed on foreign investors for earnings made on stocks here. It was the first time that taxes for realized dividends have made their way back to the country where the investment was made.
Under the tax treaty between the two countries, Seoul authorities are subject to 15 percent of local income generated on capital from Swiss accounts.
Swiss authorities however rejected Seoul’s request to disclose information about investors who paid taxes.
Seoul on Dec. 31 sealed a deal with Swiss tax authorities to exchange information about financial transactions. The deal, however, due to go into effect in 2012, isn’t likely to help in this case because it allows Seoul to access only transactions that took place from this year onwards.
“Swiss authorities would probably want to narrow the scope of time and this won’t make it easy for us to seek the origin of the money being invested here,” a NTS official said.
The Group of 20 leaders in November requested that Switzerland end the era of banking secrecy during its meeting in Seoul. The country since then has extended administrative services regarding tax evasion.
“Swiss authorities definitely became more cooperative about sharing information after G20 leaders made their push in November,” a Finance Ministry official said.
UBS, the banking giant of Switzerland, handed over information on 4,450 clients to U.S. tax authorities in August 2009.
By Cynthia J. Kim (email@example.com