The Finance Ministry said Monday that tax authorities were considering easing probes on conglomerates and other major enterprises to communicate the Park Geun-hye administration’s determination to spur the economy this year with their help.
Such policy moves, however, are likely to pose a dilemma and even invite backlash among some lawmakers as the government is already operating at a deficit.
According to data released by the Finance Ministry, central government tax revenue stood at 201.9 trillion won ($183 billion) in 2013, down 8.5 trillion won from its earlier estimate. The figure is also below the 203 trillion won in tax revenue for 2012.
This marked only the third decline in tax revenue on-year, after the figure fell during the 1997-98 Asian currency crisis and 2008-09 global financial crisis.
Officials said the Finance Ministry is closely working with the National Tax Service over the policy direction of its tax investigations into major Korean companies during the first half of 2014.
Later this month, the ministry and NTS are scheduled to report its tax-probe plan to the presidential office and publicize the finalized policy direction.
“Critics may want to highlight the low tax revenues, but we want to focus on the fact that the companies fell into bigger trouble because they were unable to pay their corporate taxes, and when this happens, the economy suffers even more,” said a ministry official.
“For a quicker and more solid economic recovery, it is necessary for policymakers to ease overly strict probes or slash the number of on-the-spot tax investigations,” he said.
He added, however, that this did not indicate that the tax authorities would tolerate illicit activity, such as tax evasion or allow taxes to be left in arrears.
While the tax authority plans to rule out unnecessary tax probes into the business sector, it would maintain its stance that stern punitive action should be taken against the black market, the official added.
Meanwhile, some market insiders allege that easing the tax investigations was a political ploy aimed at winning over companies and other potential voters ahead of the June 4 local elections.
Over the past few months, there have been a series of meetings between major business lobbies and senior government officials on how to create a better business environment.
Business leaders have reportedly called on the administration to create a favorable business environment through deregulation, tax cuts and making the labor market more flexible.
In the meantime, Korean companies and wealthy individuals were found to have continued to increase their remittance to overseas tax havens.
According to the Bank of Korea and data from the financial investment industry, their money transfers to tax havens including countries in the Caribbean have nearly doubled since the 2008 financial crisis.
By Kim Yon-se (firstname.lastname@example.org)