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Companies likely to be pressured by increasing penalties

Companies likely to be pressured by increasing penalties

Posted December. 24, 2013 07:06,   


Economy-related ministries and agencies have increased the target of fines and penalties significantly for next year. As most of the penalties come from companies, some point out that they are inconsistent with the government’s plan to stimulate the economy.

The Dong-A Ilbo obtained next year’s budget proposal submitted to the National Assembly on Monday and found that 14 economy-related ministries and agencies proposed that they would raise 996.7 billion won (939.4 million US dollars) in penalties, up by about 200 billion won (188.5 million dollars) (25.1%) from 796.8 billion (750.9 million dollars) this year.

The Fair Trade Commission, so-called “economic prosecutors,” had the largest increase in penalties. It increased its target from this year’s 604.3 billion won (569.5 million dollars) to 697.6 billion won (657.4 million dollars). A source from the commission said, “Fines for price fixing account for the largest part of the penalties. We factored in the upward trend in taxes for next year’s target.”

The National Tax Service, which said it would raise 71.8 billion won (67.7 million dollars) in penalties this year, doubled its target revenue for next year to 149.5 billion won (140.9 million dollars). It expects a large increase from the underground economy by using information from the Korea Financial Intelligence Unit. For the same reason, the Korea Customs Service also raised its goal by 12.8 percent from 15.9 billion won (14.9 million dollars) to 17.9 billion won (16.8 million dollars). A source from the agency said, “We increased penalties 24 percent from this year because we expects to detect more illegal foreign exchange transactions of companies in the course of shedding light on the underground economy.”

The Nuclear Safety and Security Commission increased the largest percent. Its target amount increased 365.7 percent from 67 million won (63,100 dollars) this year to 312 million won (294,060 dollars) next year. The commission said, “We had larger than expected penalties this year as a result of investigations into the corruption scandal. We came up with the number considering the stricter punishment.”

The Korea Communications Commission (57.7 percent), the Ministry of Land, Infrastructure, and Transport (43.5 percent), and the Ministry of Employment and Labor (31.9 percent) said they would increase penalties by more than 30 percent. Statistics Korea said it would introduce penalties next year.

Some ministries complained that they were forced to increase their target excessively due to the pressure from the Ministry of Strategy and Finance. A source said, “Targets increased significantly from the previous year because of the Strategy and Finance Ministry. As the ministry set a high standard due to the lack of tax revenues, we had to follow it.”

An increase in fines and penalties requires strict law enforcement. Some say that companies will be in trouble next year. A source from an employers’ group said, “The governments’ stronger enforcement would constrain businesses’ economic activities. It is hard to understand how they can set a target of penalties. Penalties are levied in case someone violates laws.”

Others say that the Strategy and Finance Ministry has another reason for pushing economy-related ministries and agencies to increase their budget for penalties. National Police Agency, which is one of the largest penalty collectors, said it would raise 898.7 billion won (847 million dollars) last year but it achieved only 60.9 percent or 547.6 billion won (516.2 million dollars). It said it would raise about one trillion won (942.5 million dollars) this year. As it strictly cracks down on drunk driving at the end of the year to achieve its goal, drivers are complaining about this. The agency eventually cut its goal to 800 billion won (754 million dollars) for the 2014 budget. As a result, economy-related ministries and agencies were forced to make up for the shortage of 200 billion won (188.5 million dollars).