5.6 Quadrillion Won Sent to Tax Havens in Past Ten Years

Over 5.6 quadrillion won (US$5.1 trillion) was leaked to tax havens since 2003. The transfer volume has also increased sixfold and the number of individual transferrers increased by 50%.

According to Bank of Korea’s report, Foreign Currency-denominated Money Transferred to Tax Havens, the amount of foreign currency-denominated money transferred to tax havens in 62 countries such as England and Hong Kong from 2003 to 2012 reached 5.6 quadrillion won (US$5.1 trillion).

The transfer amount, which was at 78.0707 trillion won (US$71.8 billion) in 2003 increased 5.7 times to 453.0354 trillion won (US$414.5 billion) in ten years.

Tax haven refers to countries that exempt or apply extremely low income tax rates in order to attract foreign capital.

According to the report, 62 countries including England, Hong Kong, Singapore, and Switzerland were identified as tax havens. These tax havens are identified by the Korea Customs Service and include 50 countries scrutinized by the National Tax Service. This is the first time the transfer amount was revealed at a national level.

The largest amounts of money were transferred to England, Hong Kong, and Singapore in the past ten years, followed by the Netherlands, Philippines, Switzerland, Canada, Luxembourg, Ireland, Malaysia (Labuan), and the Cayman Islands.
 
The number of individuals and corporations sending money to tax havens also increased. The number of individuals increased by approximately 50% from 27,500 ten years ago to 47,000 last year. And the number of corporations increased from 134,900 ten years ago to 142,200 last year.

This report only includes funds that are declared lawfully, and tax authorities predict that there is a significant amount of money that is not declared. Even when declared, transfers are made through companies established in other nations, making it difficult for tax authorities to catch the flow of money.

As the rapid increase in offshore tax evasion is revealed, the tax authorities will examine the volume of money leaked to tax havens and strengthen investigations. "There’s a chance of offshore tax evasion in the money transferred to tax havens. We are communicating with tax haven countries that are under a tax agreement with Korea,” explained National Tax Service official.

“Once the money is transferred to tax havens, investigation becomes difficult, and even if found guilty of offshore tax evasion, it’s difficult to have the assets attached. It’s necessary to closely analyze the transfer records to tax havens,” pointed out Lee Man-woo of the National Assembly’s Strategy and Finance Committee