[Op-Ed] Overseas Tax Evasion

Suspicion has surfaced over the purchase of American real estate by the children of the Hyosung Group chairman. Ahn Chi-yong, the operator of One Person Media, has brought up this allegation. Once a reporter in Korea and the U.S., he is running a personal blog called “Secret of Korea” (http://andocu.tistory.com) in New York. Using Internet searches and examination of documents at public registry offices, he has been tracing real estate transactions and ownership of American land by Koreans and Korean Americans. The U.S. has a system for disclosure of such data via the Internet, and allows free public access to such information. This system offered him the means for tracing such transactions. Ahn also publicized land transactions in the U.S. by relatives of Lee Hu-rak, a former Korean intelligence chief who recently died.

Other countries are stepping up efforts to trace and prevent overseas tax evasion due to the drive to expand tax revenues in the wake of the global financial crisis. Overseas tax evasion refers to smuggling out domestic income abroad without paying taxes, or failure to report income earned overseas to domestic tax authorities. The U.S. has received data on overseas financial accounts through the Internal Revenue Service’s indemnification program. As a result, reports have been made on more than 14,700 bank accounts opened in more than 70 countries. The IRS expects to rake in billions of dollars in additional taxes based on the reported data.

In Korea, the National Tax Service will establish a tracking center for overseas tax evasion under its deputy chief. The center aims to closely monitor the smuggling of capital by the rich under the pretext of investing by using secret accounts in countries that allow confidential financial transactions or tax havens. Cracking down on overseas tax evasion is also related to the dismantlement of confidential financial transactions in certain countries. Nevertheless, Korea will find it far from easy to check secret bank accounts opened at Swiss banks.

What Ahn has discovered could be just the tip of the iceberg in wealth smuggled out by those in power or the elite. If the new center to prevent overseas tax evasion unearths wealth smuggling by those in power, something that has long been suspected, it will be a belated but important victory for Korea. This forward-looking action could do more than just curb the flow of corrupt money.

Editorial Writer Kwon Sun-taek (maypole@donga.com)