[Op-Ed] Tax Havens

Countries are cracking down on tax havens. Germany is investigating nationals with secret bank accounts in the LGT Group in Liechtenstein. After U.S. Democratic Senator Carl Levin said Americans hide a combined 18 billion dollars at UBS, a major Swiss bank, Washington obtained the list of the 250 American clients of the bank. UBS is now under U.S. pressure to hand over the names of an additional 52,000 clients. The Group of 20 financial summit starting Thursday in London will discuss better monitoring and transparency of tax havens.

A tax haven is a country or a region where banks impose little or no corporate and income tax, and receive fees for keeping accounts and helping establish corporations. The world’s leading tax havens are the Bahamas, Bermuda and the Cayman Islands in the Caribbean Sea; Liechtenstein, Switzerland, Monaco and Andorra in Europe; and Labuan Island in Malaysia. Taking advantage of low taxes and fewer regulations on foreign currency and guarantee of anonymity, many people use tax havens to launder money. Such havens are also home to hedge funds, which have put the global economy and financial sector in turmoil.

In Korea, 45 people who amassed slush funds and evaded taxes by setting up paper companies in tax havens such as the Cayman Islands were booked by the National Tax Service Monday. To avoid tax audits, they wired illegal money to accounts in banks in tax havens opened under foreigners’ names. Some wired money back to Korea under the guise of investment to purchase real estate.

If the wealthy fail to keep a sense of moderation and magnanimity amid the economic slowdown, they will incite class conflict and stir up social unrest. Both the Korean government and courts should harshly punish those who divert funds overseas and evade taxes. A country that tolerates nasty economic criminals cannot be viewed as business friendly.

Editorial Writer Kwon Soon-hwal (shkwon@donga.com)