SEOUL, April 22 (Yonhap) — The value of money remittance made by South Korean companies into offshore tax havens rose 56 percent last year from the previous year, data showed Monday, amid a nationwide drive to expand tax bases as part of an effort to fund an increase in social welfare spending.

Money transferred by local companies into financial institutions based in such tax havens for the purpose of investing in financial instruments was valued at US$1.62 billion as of the end of last year, up from $1.04 billion the previous year, according to the Bank of Korea (BOK)’s report to lawmakers.

A tax haven refers to a state or territory where certain type of taxes are not levied or are imposed at very low rates, luring some individuals and firms into setting up overseas paper companies and foreign accounts to hide wealth and earnings to avoid paying local taxes.

The BOK said that only money remittance into the four tax havens — the Cayman Islands, Bermuda, the British Virgin Islands and Labuan, a small East Malaysian island — have so far been reported to the central bank, which indicates that the value of hidden financial transactions may be considerable.

The money remittance into the Cayman Islands amounted to $1.23 billion as of end-2012, up from $654.7 million the previous year, the report showed. As of end-2011, around 14 financial and non-financial subsidiaries of 30 Korean conglomerates were located in the Cayman Islands, according to the data.

The money transfer by local firms into the British Virgin Islands amounted to $51 million as of the end of 2012, marginally up from $48.6 million a year earlier, it added.

Korea’s tax authorities are stepping up efforts to clamp down on tax evasion and any other illegal financial transactions as part of the government’s drive to crack down on the underground economy.

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