Chapter 429 |
President Heo Chang-min spoke again at a meeting of senior secretaries at the Blue House.
"The act of some corporations and wealthy individuals illegally hiding assets overseas to evade taxes is a representative anti-social act that harms the fairness and justice of our society. To eradicate this, I ask the relevant agencies, including the National Tax Service, the Korea Customs Service, and the Prosecutors' Office, to establish a joint investigation team and devise a plan for cooperation, from tracking and punishment to the recovery of criminal proceeds. Only when we establish the principles of taxation and all citizens become equal before the law can we say we have created a Republic of Korea where justice flows like a river."
At the president's words, the Blue House moved, and in response to the Blue House's movement, the ruling party and various agencies reacted. Immediately, working-level officials from the prosecution, the National Tax Service, and the Customs Service met to form a joint investigation team, which was also joined by the Financial Intelligence Unit and the Financial Supervisory Service.
The plan was to meticulously analyze voluntarily reported details and overseas remittance transactions collected from each agency to uncover tax evasion and money laundering.
In effect, an all-out pressure campaign was being waged on the issue of offshore tax evasion.
Among the chaebols, more than ten individuals whose names were mentioned had suspicions raised against them. If they had merely hidden assets or income under borrowed names, it would end with tax evasion, but if they had siphoned off company funds, charges of embezzlement and breach of trust would be added.
There might have been a backlash, but after Chairman Im Jin-yong's arrest, the business world was in an atmosphere of walking on thin ice, so no one could say a word.
It was like saying, "Let he who is without sin among you cast the first stone," but everyone had committed so many sins that they had no choice but to remain silent.
It's unfortunate, but this is the reality of Korea's chaebols.
Tax collection is a power of the state and the foundation that maintains the country. However, no one wants to pay a lot of taxes. That's why they walk a tightrope between tax avoidance and tax evasion to pay as little as possible.
Just as the National Tax Service's investigations are becoming more sophisticated, the methods of siphoning off funds are also becoming more ingenious. Shall we call it a cat-and-mouse game?
As revealed by the Panama Papers incident, establishing a corporation in a tax haven is now a common practice.
In any case, even if a bill to strengthen voluntary reporting and punishment for offshore assets is legislated, it is unlikely to affect us much.
Everyone already knows that OTK Company is a corporation in Dela Island and about its shareholding structure.
Only a portion of the corporate assets is cash; most of it consists of shares in various companies.
CarOS, OTK Games, Face-it, M Pizza, ArcIT, Tenway, and so on.
Those companies are also all unlisted, making an accurate valuation difficult. It's just the media making a fuss about hundreds of billions or even a trillion dollars.
According to the voluntary report form, the corporation's exact financial status must also be submitted.
If this happens, the government will be able to see, as if looking at the palm of its hand, how many shares of which company OTK Company owns, where it has invested, and how much it has earned.
***
We first met with Hyun-joo noona. The financial sector was also reacting sensitively to the government's policy changes.
She said she had been flooded with inquiries from all over for a day.
"The ones in an uproar right now are the large corporations and the wealthy, not us. There are more than a few individuals and companies that have set up corporations in tax havens. Everyone is on high alert about the National Tax Service's movements."
"How much will this affect us?"
Hyun-joo noona said while drinking her coffee.
"Well, the government can't tax a foreign corporation. However, it can pressure them to transfer some funds into the country or to list their subsidiaries on the stock exchange."
Most companies aim to go public. But among them, only a very small number are actually listed.
The reason they strive to pass the needle-thin screening process or use expedient methods like backdoor listings through mergers is to raise funds by selling shares to investors.
But we don't need to do that. Instead of receiving external investments, OTK Company has made money through various financial investments and invested in its subsidiaries.
Even if we needed more investment funds, there is no reason to choose to go public when there are already lines of places willing to invest.
A day might come when we have to, but not yet.
Taek-gyu said.
"If Korea gives us a hard time, can't we just change our citizenship to American?"
Hyun-joo noona shook her head.
"It's not that simple."
"Why not?"
"Do you think there are no taxes in the United States?"
Death and taxes are unavoidable, and you might be able to shake the FBI, but the IRS (U.S. Internal Revenue Service) will chase you to the ends of the earth.
Developed countries tend to tax more heavily, not less.
The United States is no different when it comes to collecting taxes on its citizens' offshore income. No, in fact, they collect it more thoroughly than Korea.
In Korea, you can just hold out, saying you don't have the money to pay taxes, but in the U.S., you'd be arrested immediately.
The conclusion is that changing citizenship to American is not a solution.
"Why are they doing this now?"
Hyun-joo noona said, sipping her coffee.
"It's the same as Chairman Im Jin-yong's arrest. The economic situation is good, and thanks to the Saemangeum development, the president and the ruling party's approval ratings have risen significantly. Since victory in the next general election is seen as certain, they're going to do whatever they want."
Taek-gyu nodded as if he understood.
"Hmm, is it a case of 'secure your own base before attacking the enemy'?"
In the case of the Saemangeum development, numerous domestic and foreign capitals decided to invest, trusting me. As such, it's hard for them to back out now.
"They might have also judged that if time passes like this, political power could be swayed by capital power. For Korean chaebols, it's commonplace for a company to be taken over or a group to be dismantled over just one or two trillion won. Compared to that, OTK Company is on a different scale. With its subsidiary, CarOS, being talked about as the world's number one in market capitalization, OTK Company's scale is beyond question. A company of this size being in a tax haven and being unlisted is unprecedented. As you know, this situation cannot last forever."
In short, the company had grown too large to remain in a tax haven. It was only because it had the structure of an investment and holding company; if it had been directly engaged in business, the problem would have blown up long ago.
"The corporate tax Seosung Electronics paid in Korea last year alone was 17 trillion won. If they could just bring OTK Company over, they could expect even more tax revenue than that."
"We don't generate that much profit."
"That's because you keep reinvesting to the point where you don't leave a profit. Leaving aside the immediate tax revenue, just moving the corporation would increase the nation's wealth by more than a trillion dollars. Wouldn't any country covet that?"
Although the Korean government suddenly drew its sword, other developed countries had already been waging a war against tax havens for some time.
In the case of manufacturing, companies have permanent establishments in each country and pay taxes in that region. However, data and services cross borders freely.
Even if services are sold in Korea, the taxes on the profits are paid in another region where the server or corporation is located. Of course, that region is usually a low-tax-rate tax haven.
In response, various countries are devising measures to find ways to collect these taxes.
The United States is also struggling with offshore assets.
Companies like Npple and Gooble have hundreds of billions of dollars in cash piled up in foreign corporations in tax havens like Ireland.
They keep the money there because bringing it into the U.S. would incur enormous taxes.
President Ronald, while brandishing a stick by telling large corporations to bring their foreign-held cash to the U.S., also held out a carrot by offering a temporary, significant reduction in the remittance tax.
I thought for a moment.
Is this really for social justice, as President Heo Chang-min said, or is it because they fear me, as Officer Shin Jong-hoon said?
I recalled my meeting with President Heo Chang-min. His expression and actions were filled with strong conviction. If Park Si-hyeong acted solely for his own benefit, is he acting for the justice he believes in?
A thought suddenly occurred to me.
With the money I have, couldn't I establish a political party and make a president?
In a democracy, political power is elected through elections. But historically, money has always had a great influence on elections.
American elections are practically run on money. And at its foundation are Super PACs, political donation funds that can raise unlimited amounts of money.
Election funds are gathered because a candidate seems likely to win, and because election funds are gathered, it leads to an actual victory.
In the last U.S. presidential election between Ronald and Diane, everyone expected Diane to win. This was because, unlike Diane, who had gathered enormous Super PAC funds, Ronald ran his campaign without them.
Therefore, Ronald's victory was a huge upset. And thanks to not receiving Super PAC money, he was able to implement his policies as he wished without being swayed by his sponsors.
The figures who exert the most influence on American politics through such political donations are the Koch brothers.
The two brothers, who run a giant oil corporation called Koch Industries, hold sway over the Republican Party.
It's said that without their support, it's impossible to even run in the party primaries.
Unlike the U.S., Korea does not permit unlimited political donations. But with money, there are many things you can do.
In fact, I got Ronald elected by investing in the Rust Belt. There's no law saying I can't do the same in Korea.
***
The National Tax Service began an intense tax audit on 59 individuals suspected of offshore tax evasion as the first batch.
Simultaneously, the prosecution also launched an investigation.
Related chaebol leaders stood one after another in front of the press line at the prosecutor's office. The opposition party and conservative media criticized this as an attempt to kill the chaebols, but the National Tax Service and the prosecution seemed unfazed.
And a guest came to visit OTK Company.
They were a middle-aged man and woman who looked perfectly ordinary on the outside. At a glance, they even looked like a married couple.
But the two were just work colleagues.
"Hello. I am Chief Investigator Jang Ki-wook from the National Tax Service."
"I am Investigator Lee Bo-kyung."
Taek-gyu spoke with a sense of wonder.
"You're coming in person for a voluntary report? Since when did the National Tax Service's service get this good?"
It doesn't matter to salaried workers, but for business owners, the National Tax Service is scarier than the prosecution. The reason, of course, is tax audits.
A single proper tax audit can make even a successful large corporation stumble.
Of course, this is also proof of how severe corporate tax evasion is. In the case of the Seosung Group, when the NTS raided them for an emergency tax audit, security guards blocked them from entering while they removed and degaussed the hard drives containing accounting records.
Former President Park Si-hyeong used to wield tax audits like an all-powerful sword against individuals and companies that didn't listen to him. We also had experience with a few tax audits. It had been quiet since the Big One.
The two sat down and looked over the documents we presented.
After carefully examining them for a long time, Chief Investigator Jang Ki-wook raised his head and looked at me.
"There are many omissions in the reported details. The attached materials are also incomplete."
"That can't be. My personal assets and income, as well as the taxes paid and expenditure details, should have been perfectly organized."
"There is no problem with that part. However, a significant amount of information about OTK Company is missing."
"Isn't the voluntary reporting of detailed offshore asset information just a recommendation, not yet legislated?"
At my words, he closed the document he was looking at.
"CEO Kang Jin-hoo. You have done many great things so far, and I respect you for that. But you are also a citizen of the Republic of Korea, and shouldn't you abide by the law and its principles?"
The two had the unique aura of tax officials. When your job is stable and your salary comes in regularly, there's no need to worry about what others think.
That's why, whether the other party is a chaebol leader or a person of power, they can just focus on their inherent duty of tax collection.
I chuckled.
"The law and its principles? I understand you want to put a leash on a tiger's neck, but..."
"Excuse me?"
"Go back and tell them this. I will continue to voluntarily report on matters I deem necessary. But for those I do not, I have no intention of doing so in the future either."