Korea will be able to access information on Swiss bank accounts held by Koreans according to the finance ministry, Friday.
The Ministry of Strategy and Finance said that Korea and Switzerland have agreed to revise a double-taxation avoidance deal and that the revised treaty will become effective from July 25.
The ministry said that the deal will make it easier for each nation to request and obtain financial information on individuals suspected of hiding money in secret bank accounts for tax evasion purposes
Both countries exchanged ratification documents for the bilateral tax treaty revision in Bern, Tuesday. It was ratified by the National Assembly in February and the Swiss followed suit earlier this month.
The ratification followed the two countries’ agreement to revise their tax treaty in 2010 on the exchange of information about financial activities by nationals of each other’s country.
Switzerland has often been regarded as a safe haven for those who want to stash away ill-gotten wealth without paying taxes thanks to the country’s strict banking privacy laws. These have recently been loosened due to actions taken by other countries regarding their nationals’ accounts.
“We will exchange financial information with Switzerland, which had kept its doors closed under the principle of banking privacy,” said Lim Hwan-soo, an assistant commissioner of the National Tax Service (NTS) at a news conference earlier this week.
Under the treaty, Switzerland agreed to provide banking information on Korean nationals for the purpose of equitable taxation
“If it comes to it, we will be able to check Credit Suisse bank accounts of Koreans we suspect of being tax evaders,” said Hwang In-woong, a director at the finance ministry.
This is a drastic change for the European country which had refused to unveil bank customers’ information under the principle of banking privacy guaranteed by its Constitution.
But it has been forced to open up after foreign governments and international organisations, in particular, the United States and the Organisation for Economic Cooperation and Development, pressured it to do so by imposing fines on Swiss banks and filing lawsuits against them.
The NTS is also planning to share tax information with the Marshall Islands and Cook Islands.
“We will trace and levy taxes on illegal capital outflow and overseas tax evasion conducted by big conglomerates, mid-tier firms and rich people,” a tax official said.
Meanwhile, the owner of a medium-sized firm, identified only by his surname Hong, was one of eight people exemplified by the NTS for tax evasion. Tax officials said he established a paper company in Switzerland, and bought stakes in a Korean business through the fake firm.
He earned 7.1 billion won from dividends from the Korean company and made 28.3 billion won from selling shares but did not report the income. The NTS levied 13.3 billion won in income tax on Hong and imposed fines for not reporting his overseas financial accounts. -By Kim Jae-won