Tax Evasion Issue
Science, ICT & Future Planning Minister candidate Yoo Young-min recently said that he is well aware of the reverse discrimination regarding tax evasion by global IT companies in South Korea and legal revision and effective law enforcement can be a solution to the problem. With regard to his remark, industry experts pointed out that fair and equal regulations for the growth of the sector and consumer protection that reflect the characteristics of the industry should be prepared rather than lopsided and fragmented ones targeting global IT giants.
At present, it is corporate tax that is the hottest issue concerning the reverse discrimination. The tax is imposed on each company that has a fixed place of business in South Korea. Google Korea, in the meantime, has its server as a fixed place of business in Singapore. As a result, the company pays no corporate tax at all although its annual sales are estimated at over one trillion won. In this regard, the South Korean government amended the Act for the Coordination of International Tax Affairs in December last year so that income- and tax-related reports are mandatorily submitted by multinational companies. The amended act, however, becomes effective next year.
Another case of the reverse discrimination is that Google Korea, Apple Korea and the like are registered as limited liability companies subject to no mandatory accounting disclosure and external audit. This means their financial statements do not have to be disclosed and the most fundamental data for taxation itself is absent. The South Korean government is looking to amend the Act on External Audit of Stock Companies in this regard, but this is unlikely to be completed in the near future.