As published on koreatimes.co.kr, Tuesday 11 October, 2022.
Over $11.2 billion (1.59 trillion won) in foreign direct investments (FDI) made by Korean firms and individuals found its way to tax havens including the Cayman Islands and Panama last year, a main opposition party lawmaker said Monday.
This amount accounted for 14.6 percent of the country's total FDI totaling $76.4 billion in the same period.
Investment funds funneled to tax havens are used mostly for corporate mergers and acquisitions. However, concerns remain about illicit activities from links between the funds and tax evasion attempts through shell corporations set up and operated by Korean nationals.
According to data submitted to Rep. Kang Jun-hyeon of the main opposition Democratic Party of Korea by the state-run Export-Import Bank of Korea, Korea's FDI in tax havens came to $8.6 billion in 2019, up from $1.81 billion in 2012. The figure has been on the rise over the past decade.
The FDI in tax havens accounted for 13.3 percent of the total FDI made by Korean firms and individuals in 2019, up from 6.1 percent in 2012.
Investments worth over $5.8 billion ― or 51.8 percent of the total ― were made by large firms. Almost all of the amount went to the Cayman Islands ($5.79 billion).
Small and medium-sized firms invested about $2.1 billion ― accounting for 18.9 percent ― followed by investments made by individuals at $48 million, accounting for 0.4 percent.
Also notable were cash transfers to tax havens registering a 29.1 percent year-on-year increase of nearly $6 billion. The amount came to $26.3 billion last year, up from $20.4 billion a year earlier.
An increase in FDI and cash transfers to tax havens indicates a higher likelihood of tax evasion attempts, said Kang, who is a member of the National Assembly Strategy and Finance Committee.
"The National Tax Service should expand exchanges of information with its global peers and identify unregistered overseas financial accounts, as part of efforts to prevent offshore tax evasion," he said.