From Yonhap News Agency

SEOUL, May 27 (Yonhap) — The Cayman Islands is the largest investor as a tax haven country in the South Korean market, data showed Monday, amid growing suspicions here that some of the money belongs to rich Korean nationals disguised as foreigners running off-book accounts.

The amount of investment by the British overseas territory in local stocks and bonds reached 7.7 trillion won (US$6.82 billion) at the end of April, with the number of investors standing at 2,796, according to the data by the Financial Supervisory Service (FSS).

Their value of equity holdings came in at 6.5 trillion won, or 1.6 percent of the total securities investment by foreigners, with the corresponding figure for bonds standing at 1.85 trillion won, or 1.1 percent of the total, the data showed.

Cayman Islands investors made up 7.7 percent of all offshore investors participating in the local market, and they are the third largest group after the United States with 12,163 and Japan with 3,444, the FSS said.

The revealing data came amid evolving speculation here that such offshore accounts are used by high-profile Korean businessmen and their families as a means to avoid taxes or stash away massive amounts of slush funds.

A non-profit journalists’ organization last Wednesday disclosed a list of three names of heads of family-owned conglomerates, known here as chaebol, who have set up a paper company in the British Virgin Islands and the Cook Islands, two other well-known tax haven regions.

The independent journalists’ group is scheduled to release its second lot of suspected tax evaders on Monday, in what could unleash further controversy over possible irregularities in large firms’ overseas accounts.

The move also came after the prosecutors’ office launched an extensive probe into allegations that owners of CJ Group, the 14th-largest conglomerate in South Korea, have engaged in organized tax evasion activities through funneling huge amounts of secret money to their offshore accounts in Hong Kong and the Virgin Islands.

To be in step with the law enforcement authorities, the FSS began its own investigation to see if any local company had manipulated stock prices in the Seoul market by pretending to be foreign money based in a tax haven country.

Foreign-led stock price rigging can deal a serious blow to the local market since their holdings account for more than 30 percent of the total market capitalization, leading to market volatility.

For more on this story go to:

http://english.yonhapnews.co.kr/business/2013/05/27/81/0503000000AEN20130527003700320F.HTML

See also following story from Arirang News

Non-profit agency reveals second list of paper company owners

By Yoo Li-an

The non-profit news agency responsible of last week’s release of the 245 Koreans who own paper companies abroad, has released a new list on Monday.

The seven on the list are the heads, incumbent or former board members of conglomerates.

In the list of prominent figures is the head of Hanjin Shipping Holding Co., Korea’s leading shipping company, the former executive of an affiliate of Hanwha Group, and the vice chairman of SK securities.

Upon the release of these names, the companies’ shares lost ground, with Hanjin Shipping Holding Co. by the biggest margin of over four percent.

“The public has the right to know about the leaders of society secretly creating paper companies in tax havens”

A recent report by the online conglomerate tracker Chaebul-dot-com showed that the funds in their foreign branches amounts to 5.7 trillion won, or roughly five billion U.S. dollars.

Hanwha Group held the most assets abroad at 1.5 billion U.S. dollars, followed by SK Group at 1.1 billion, then Daewoo Shipbuilding and Marine Engineering at 700 million.

Most of these companies were in Panama, the Cayman Islands, and the British Virgin Islands — areas well known as tax havens.

Whether all these foreign branches are paper companies, is yet to be investigated but what we do know so far is that more than half of these companies had no history of any transactions.

In other words, they’re most likely paper companies that hold slush funds to avoid taxes.

“Offshore tax evasion is highly systematized and globalized. This cannot be controlled by a country’s taxing authorities but requires global cooperation.”

Korea’s National Tax Service is currently looking into some twenty Koreans who were on last week’s list and the agency looks set to launch further investigations into the new set of names released Monday.

For more on this story go to:

http://www.arirang.co.kr/News/News_View.asp?nseq=147562

See related story:

Conglomerates found to hold some 5.7 tln won in tax havens: data

From Yonhap News Agency

SEOUL, May 26 (Yonhap) — South Korea’s large businesses are found to hold some 5.7 trillion won (US$5.1 billion) worth of assets through their corporate entities in tax haven regions, data showed Sunday.

According to the data by market researcher Chaebol.com, 24 local conglomerates were found to run corporate entities in nine tax havens, including the Cayman Islands, Panama, the Marshall Islands, Samoa and Cyprus.

The businesses cited in the data are private conglomerates holding 1 trillion won or larger in total assets. As of end-March, the number of their corporations in those regions stood at 125.

The entities held a combined 5.69 trillion won worth of assets in the regions that were designated as tax havens by the Organization for Economic Cooperation and Development.

They present much lower tax rates and less tax-related regulations, a condition that experts believe could lead to offshore tax evasion.

Hanwha Group was found to hold the largest 1.68 trillion won worth of assets in four such entities, followed by SK Group with 1.33 trillion won. SK Group, in particular, was found to operate the largest number of corporate entities at 63.

“Most of the offshore entities are related to the shipping business. … They are all disclosed in our financial statements, and the nature of the money involved is not illegal,” an SK official said.

Meanwhile, Samsung Group and LG Group hold 353.6 billion won and 334.2 billion won in assets in the cited regions, respectively, the data showed.

The data came after a group of independent journalists earlier disclosed names of business people and their families who have allegedly set up paper companies in tax haven countries apparently in order to hide money or avoid paying due taxes.

The list is based on data that the organization analyzed jointly with the International Consortium of Investigative Journalists (ICIJ).

Lee Soo-young, the owner of polysilicon-making giant OCI Co., and his wife were included on the list. OCI later confirmed that Lee had held $1 million in his personal bank account in the British Virgin Islands.

The National Tax Service (NTS) is poised to look into the matter.

“We will investigate by combining our own offshore tax evasion data that we have collected with the data disclosed by the ICIJ,” an NTS official said on condition of anonymity.

“Currently, we are in a reviewing mode,” he said. “Our principle stance is that we will conduct fact-checking and if a suspicion arises, we will take stern action such as a tax probe and tax collection.”

For more on this story go to:

http://english.yonhapnews.co.kr/business/2013/05/26/52/0502000000AEN20130526000400320F.HTML