South Korea slammed the European Union's decision on Wednesday to put Asia's fourth-largest economy on a new EU blacklist of tax havens, saying that its inclusion is "not in accordance with international standards" and poses the risk of "violating taxation sovereignty."
On Tuesday, the EU disclosed a blacklist of 17 countries, including Macau, the Marshall Islands and the United Arab Emirates in what it claims is a substantive step to deter worldwide tax avoidance.
The EU said South Korea has "harmful preferential tax regimes" and did not commit to amending or abolishing them by 31 December 2018, according to its release. The EU took issue with tax benefits for foreign companies which invest in free economic zones and other dedicated zones, according to Seoul's finance ministry.
Brussels said the blacklisted countries have harmful tax regimes that go against the principles of the EU's code of conduct or the OECD's forum on harmful tax practices.
The EU further claims countries on its list have not committed to implement the OECD's Base Erosion and Profit Shifting minimum standards, nor did they comply with international standards on automatic exchange of information and information exchange on request.
But the finance ministry said the EU had adopted criteria different from the OECD's BEPS standards by expanding their application to the manufacturing sector.
The OECD's BEPS standards are limited to such sectors as service and finance that have high mobility, according to the finance ministry.
Also, South Korea's tax benefit scheme for foreign investors was already confirmed to comply with the OECD's BEPS standards, it emphasized.
Regarding the lack of transparency, the finance ministry said Seoul has an extensive information sharing system through multiple pacts with other nations.
South Korea has a free trade deal with the EU and views the common market as one of its key trading partners. (Yonhap)