A parliamentary committee has passed a bill allowing the imposition of penalties on foreign multinational companies, such as Google and Netflix, if they refuse to submit tax audit data to government authorities.
On Tuesday, the National Assembly's Planning and Finance Committee approved an amendment to the Framework Act on National Taxes aimed at preventing multinational corporations from evading stricter tax compliance by opting for light fines.
Under the revised law, the noncompliance penalty will be set at 0.3 percent of the company’s average daily income if it fails to submit accounting records and related documents without justifiable reasons before the deadline.
If daily income is difficult to calculate, the company will instead face a fine of up to 5 million won ($3,500) per day. Unlike one-time fines, the noncompliance penalty can be imposed repeatedly until the required documents are submitted.
According to current tax laws, individuals who make false statements when questioned by tax authorities or who obstruct official duties can be fined up to 50 million won. However, critics argue that such one-time fines are too lenient, allowing large multinational corporations to evade accountability when reporting their tax payments in Korea.
Compared to domestic companies, global multinational firms have been less cooperative in responding to requests from Korea’s National Tax Service regarding tax audits.
In October 2023, Rep. Lee Jong-wook of the ruling People Power Party pointed out that a foreign multinational company had been fined only 20 million won despite ignoring over 90 requests from tax authorities for additional data.
Legislation of the bill has been a long-standing priority for the National Tax Service. However, even with the noncompliance penalty in place, the level of punishment in Korea remains relatively light compared to other countries, such as Germany, where tax violations can result in jail terms.
If the amendment passes at the plenary session of the National Assembly, it will take effect six months after promulgation.
hnpark@heraldcorp.com
