The International Consortium of Investigative Journalists(ICIJ) obtained 13.4 million documents from the Paradise Papers, which are a trove of documents about tax havens. The media companies of 67 countries inside the ICIJ uncovered the story together. The ICIJ reported that they confirmed that about 120 people, including the leaders of countries and famous politicians, dealt with tax havens. Most of the documents originated from Appleby, which is a Bermudian off-shore financing and legal firm. An Appleby spokesperson said that the leak happened after their network was hacked and that there was no insider cooperation. It was revealed in the Paradise Papers that the U.S. Commerce Secretary, Nike, Apple and also Korean corporations, including 232 Korean citizens, utilized tax havens.
  According to the ICIJ, Queen Elizabeth II of England invested 10 million pounds from her private funds in the Cayman Islands and Bermuda. Portions of the funds were invested in a liquor shop and Bright House, which houses electronics and supplies chain stores daily. Bright House was criticized in the past because they made a huge profit by exploiting the poor, which are their main customers.
  The most important factors that tax havens promise to clients are security and maintenance of secrets. Agents of tax havens help corporations establish paper companies which are hard to trace. The establishment of foreign corporations is commonly legal. Accordingly, if agents provide services which ensure secrecy within the boundaries of the law, they attract customers who need money laundering. A ‘paper company’ means an empty company that literally doesn’t have offices or employees. Such a corporation is utilized for the evasion of taxes of hundreds of million dollars that could have been taxed by the treasury in principle.
  People pay a portion of their income to their nation for maintenance of their country and development of people’s lives. As a household lives on a budget, a nation survives on the taxes of the people. The government prevents crime, supports the police, who maintain order, and manages the military, who protect the country, and it also provides necessities for the people through taxes. However, if people and corporations don’t pay taxes, they are committing immoral and illegal acts. In terms of the government, if it can’t collect the taxes that need to be collected, then tax revenue decreases and the national finances become unstable. If such news reported to society, people might feel the futility of continuing to pay taxes. Such feelings could spread rapidly among the people.
  Chun Hong-min, who is a professor of the School of Business, said, “To decrease offshore tax avoidance, OECD countries should reinforce the Base Erosion and Profit Shifting(BEPS) project that countries jointly created to thwart multinational corporations that avoid taxes by utilizing different tax systems. They should make a council to try to prevent offshore tax avoidance and then take action against offshore tax avoidance. BEPS indicates corporations or people that take advantage of tax law disparities, tax treaties or immature international tax systems. If the BEPS project is conducted, the implementation of information being exchanged among nations, including Korea, would come into effect more actively. It would also be easier to confirm the scale of tax payments on a multinational level. Therefore, offshore tax evasion would decrease generally.”

By Park Jeong-min
jm38@cbnu.ac.kr