“We have violated none of the standards suggested by the Organization for Economic Cooperation and Development or other international regulations,” Deputy Prime Minister and Finance Minister Kim Dong-yeon told reporters.
On the previous day, the EU designated 17 countries, including South Korea, as noncooperative tax jurisdictions in an attempt to curb worldwide tax avoidance. Conventional tax haven zones such as Macau, the Marshall Islands and the United Arab Emirates were also included in the list.
The EU’s claim was that the tax benefits offered to foreign business operators in free economic zones and other dedicated areas constitute a preferential tax regime, according to the ministry.
Seoul, however, refuted that the EU was forcing its criteria upon non-member states, thereby breaching international agreement and infringing on individual states‘ jurisdiction.
”After designating the candidates for noncooperative tax jurisdictions in October last year, the EU said that it would henceforth abide by the standards of the OECD,“ an official of the ministry said in a briefing.
”Up to September (this year), the OECD saw no problem (in Korea’s tax system) but the EU suddenly changed its stance.“
The OECD standard on Base Erosion and Profit Shifting is limited to highly mobile sectors such as service and finance, but the latest EU criteria included the manufacturing sector as well, according to the ministry.
”(The EU) is demanding for the abolishment of the tax benefits for foreign investors by the end of next year, an issue which we cannot decide right away,“ the official also said.
The ministry immediately sent an official letter of objection to the EU headquarters in Brussels and is currently working on dispatching a senior official for further follow-up measures.
”We are looking for reasons (why South Korea became the only OECD state to be included in the tax haven blacklist),“ he added.
Following the blacklist decision, the Korean won fell against the US dollar, closing at 1.093.7 won against the greenback, down 7.9 won from a day earlier.
Meanwhile, the National Tax Service here said it has collected 1.14 trillion won ($1.04 billion) in taxes from 187 alleged offshore tax dodgers so far this year, amid ongoing efforts to curb tax evasion through offshore tax havens.
By Bae Hyun-jung (firstname.lastname@example.org)