18/10/22

SOUTH KOREA: Foreign firms' tax evasion more than doubled since 2018.

As published on koreatimes.co.kr, Tuesday 18 October, 2022.

Foreign businesses have been increasingly engaged in tax evasion over the past four years, with the amount of unpaid taxes more than doubling between 2018 and 2021 to almost 200 billion won, data showed Monday.

Compiled by the Korea Customs Service (KCS) and released by Rep. Yang Ki-dae of the main opposition Democratic Party of Korea (DPK), the data showed foreign firms evaded paying 199.1 billion won ($138.8 million) in taxes in 2021, up from 110.4 billion won 2020, 101.7 billion won in 2019 and 91.1 billion won in 2018.

The amount totaled 43.3 billion won during the first eight months of this year.

The number of firms linked to tax evasion varied according to the year with 90 in 2018, 81 in 2019, 71 in 2020, 82 in 2021 and 55 during January and August this year.

"The taxes being dodged by foreign enterprises are rising to a worrisome level," Rep. Yang said in a press release, noting the cases of tax evasion especially surged 80.3 percent from 2020 to 2021.

He pointed out those firms are affiliates of multinational businesses, and are believed to be exploiting the difference in tax rates by countries where they operate in order to avoid paying taxes.

"The customs agency is urged to go over relevant codes to prevent tax evasion," the lawmaker added.

A KCS official explained that the reasons for tax evasion vary by company and that there is "no specific answer to why there are more unpaid taxes over the years."

"Nevertheless, we'll closely monitor suspected companies and make sure to prevent any loopholes that lead to tax evasion," the official told The Korea Times on condition of anonymity.

A separate finding from the National Tax Service (NTS) in 2021 showed multiple foreign businesses used internal trading with their parent companies abroad as a way to illegally transfer revenue they made here and reported to Korean tax authorities to make it appear as if their sales were smaller than what they actually earned.