Korea Finalizes Bill To Sock Wealthy Tax Evaders

by Mary Swire, Tax-News.com, Hong Kong

29 August 2002

The South Korean government announced this week that the reform bills designed to prevent tax evasion activity by the country's wealthiest citizens through irregular wealth transfer methods have been finalized.

Speaking to the Korea Herald on Wednesday, an unnamed Ministry of Finance and Economy official explained that:

'Following the financial meltdown in late 1997, the polarization of wealth distribution has been deepening in Korean society. The growing practice among rich people to transfer wealth to their children through illegal means has aggravated the rich-get-richer and poor-get-poorer phenomenon. We ought to redouble our efforts to rectify it.'

According to the Korea Herald, the new measures will oblige persons who receive or purchase unlisted stocks from a family member to pay donation taxes on the valuation gains arising from the listing of the stocks, if the listing is made within five years of the acquisition date.

Under the new rules, tax will also be paid on capital gains earned from the listing of the previously unlisted stocks purchased by an individual, if the money used to purchase the shares came from a family member or relative.

The Finance Ministry official told the newspaper, however, that despite redoubling its efforts to catch wealthy tax evaders, the government is finding it increasingly difficult to cope, as the country's richest citizens make use of complex financial transactions which are difficult to regulate.

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