|
The National Tax Service has launched a probe of overseas funds like Newbridge Capital, Lone Star and the Carlyle Group. The funds made billions of won in profits from selling local businesses they bought after the 1997 Asian financial crisis, but they have paid almost no taxes because they are headquartered in tax havens and don¡¯t come under Korea¡¯s fiscal authority. Because of this, the Korean people take rather a dim view of foreign capital, and some just want all foreign investors out.
Foreign investors were quick to lash out. ¡°The probe is political,¡± they say. It is therefore vital that the investigation is completely above board and does not diverge one iota from the global standard for such exercises. Unlawful profits must be taxed, but we cannot make an issue out of profits that were legally obtained. Thus profits from real estate transactions are taxed by the nation where the property is located, but as for stock sales, we must follow the OECD international taxation model in which profits made from stock sales are taxed where the investors reside.
However, the OECD does say that local tax authorities can levy taxes after consultation with other Model Tax Convention nations when there are suspicions that speculative capital has set up ¡°paper companies¡± in an attempt to dodge taxes. In this tax probe, should Korea discover problems with the taxation treaties it has signed with other nations, it must move to correct them.
The investigation got under way amid attacks in the international press saying Korea is hostile to foreign capital. Those complaints are going to get worse. It is therefore dangerous if we fail to identify the bad apples in advance and simply round them all up at once -- even if it is true that the quality of the foreign investment Korea has been attracting is going downhill. Hardly anyone from abroad is building factories, but the mergers and acquisition sharks are circling freely. We must be careful not to scare off healthy overseas investment with this probe.
(englishnews@chosun.com )
|
