The finance and justice ministers said in a joint statement this week that the government would offer immunity to people and corporations that come clean over their earnings and assets hidden abroad. The window for voluntary declarations will be open from Oct. 1 through March 31.
Those who report hidden overseas holdings during the six-month grace period will only be obliged to pay overdue taxes without being slapped with heavy punitive fines. They will also be given leniency for violating laws governing foreign exchange control and tax evasion, with their identities not being made public.
The unprecedented move was designed to give “one last chance” to make voluntary declarations about unreported wealth abroad before tax information exchange agreements that Korea has signed with the U.S. and about 50 other countries begin to take effect in 2016 and 2017.
The government has no accurate grasp of how much in earnings and assets Korean individuals and companies have hidden offshore. Data released by the International Fiscal Association Korea in 2013 estimated the amount at 87 trillion won ($72 billion), but the actual figure is thought to be far higher.
Finance Minister Choi Kyung-hwan expressed hope the measure would help increase revenue and enhance fair taxation.
An optimistic view is that the government may be able to collect about 500 billion won in extra taxes, mostly next year, by offering a way out to offshore tax evaders. This additional collection of taxes will help financial authorities fill the revenue shortage that has been widening in recent years.
Finance Ministry officials expect the grace period to lead many to come clean. It is their understanding that a lot of people and companies are willing to pay overdue taxes on their hidden overseas wealth, but have been hesitant to come forward because they fear criminal prosecution.
In their joint statement, the ministers tried to ease this worry, reassuring that people who report wealth hidden abroad would be given clemency.
But it is far from guaranteed that the promise of lenient treatment will lead to many voluntary disclosures as tax evaders are usually implicated in embezzlement, breach of trust and other serious crimes. Some offshore tax dodgers may attempt to turn their bank deposits into real estate property that is more difficult to trace.
The statement issued by the finance and justice ministers vowed to get those who have failed to report their hidden wealth overseas to be subject to thorough investigation and stern punishment. The government needs to back up its pledge with concrete and substantial preparatory work to increase pressure on those who have evaded taxes on their overseas earnings and assets. If not, the measure to set the six-month grace period will be seen only as a gesture aimed at increasing tax revenue in an easy way.
Those who report hidden overseas holdings during the six-month grace period will only be obliged to pay overdue taxes without being slapped with heavy punitive fines. They will also be given leniency for violating laws governing foreign exchange control and tax evasion, with their identities not being made public.
The unprecedented move was designed to give “one last chance” to make voluntary declarations about unreported wealth abroad before tax information exchange agreements that Korea has signed with the U.S. and about 50 other countries begin to take effect in 2016 and 2017.
The government has no accurate grasp of how much in earnings and assets Korean individuals and companies have hidden offshore. Data released by the International Fiscal Association Korea in 2013 estimated the amount at 87 trillion won ($72 billion), but the actual figure is thought to be far higher.
Finance Minister Choi Kyung-hwan expressed hope the measure would help increase revenue and enhance fair taxation.
An optimistic view is that the government may be able to collect about 500 billion won in extra taxes, mostly next year, by offering a way out to offshore tax evaders. This additional collection of taxes will help financial authorities fill the revenue shortage that has been widening in recent years.
Finance Ministry officials expect the grace period to lead many to come clean. It is their understanding that a lot of people and companies are willing to pay overdue taxes on their hidden overseas wealth, but have been hesitant to come forward because they fear criminal prosecution.
In their joint statement, the ministers tried to ease this worry, reassuring that people who report wealth hidden abroad would be given clemency.
But it is far from guaranteed that the promise of lenient treatment will lead to many voluntary disclosures as tax evaders are usually implicated in embezzlement, breach of trust and other serious crimes. Some offshore tax dodgers may attempt to turn their bank deposits into real estate property that is more difficult to trace.
The statement issued by the finance and justice ministers vowed to get those who have failed to report their hidden wealth overseas to be subject to thorough investigation and stern punishment. The government needs to back up its pledge with concrete and substantial preparatory work to increase pressure on those who have evaded taxes on their overseas earnings and assets. If not, the measure to set the six-month grace period will be seen only as a gesture aimed at increasing tax revenue in an easy way.
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