KCS to crack down on capital flight

Korea Customs Service is to follow the example of the National Tax Service and crack down on wealthy individuals and corporations that illicitly channel money out of the country to dodge tax payments.

In a report to the transition team of President-elect Park Geun-hye, the KCS said that it would also toughen its inspections on corporations that have set up paper companies in offshore havens to avoid taxes.

This is in line with efforts by the president-elect to secure a budget to finance welfare expansion. The incoming government is seeking 27 trillion won ($25 billion) annually over the next five years.

The KCS’ announcement came after the NTS briefed Park about exposing the underground economy.

The size of Korea’s black market is estimated to be around 500 trillion won, the NTS reported.

The KCS reported that Korea lost some 1.9 trillion won to illegal capital flight in the first nine months of 2012, up 68 percent from the same period a year earlier. It also uncovered 1,104 cases of foreign exchange fraud that amounted to over 3.1 trillion won.

With the forecast for Korean exports remaining dim due to the global economic slowdown, analysts said government agencies are resorting to securing the budget for the government through tougher scrutiny over private businesses in the black market, as well as the rich and conglomerates suspected of capital flight.

The KCS will, furthermore, boost inspections on traders of imported products with possibly forged country of origin labels, and those prone to illegal FX dealings.

As with the tax agency, the customs office said it will expand its information and monitoring systems, as well as provide consulting services to small and medium-sized enterprises on ways to benefit from Korea’s free trade agreement with its global partners.

The Ministry for Food, Agriculture, Forestry and Fisheries also showed strong support for farmers in its policy briefing to the team, suggesting expanding safeguard measures against disasters, welfare, and agricultural research and development for industrial growth.

Meanwhile, the Korea Communications Commission, the nation’s telecom and broadcasting watchdog, presented policies on abolishing telecom subscription fees and improving services through increased competition for greater choice for consumers.

During her campaign, Park pledged to reduce telecom fees of expensive smartphones for consumers, citing data that consumer spending for smartphones accounted for 5.8 percent of total household spending in 2011.

She suggested the elimination of subscription fees and disclosing the process of how companies come to raise telecom fees.

By Park Hyong-ki (hkp@heraldcorp.com)