Copper King released but how about his human rights?

Korea Taxpayers Association, “National Tax Service has tried unreasonable imposition counting on anti-haves sentiment”

Violations of human rights of a taxpayer…

Billion wons of consulting tax agents

Reckless media reports on a pending case of evasion in favour of the NTS  

It is claimed that the National Tax Service frequently wages tax investigations for political purposes by offering unidentified information of a particular person to the media and then generate public sentiment against the haves in order to impose tax.  

Working practices of the National Tax Service like this are clearly exposed with the recent case of so-called ‘The Copper King Case’ and the media reports have not considered the taxpayer’s basic rights.

Korea Taxpayers Association (www.koreatax.org, President Kim Sun-taek) said, “The National Tax Service tried unreasonable imposition on ‘the Copper King’ with the charge of ‘offshore tax evasion’ after mentioning the case at the cabinet meeting on 3 January and then failed to impose in the end.”

The Association also added, “The National Tax Service tried a great amount of tax imposition on the Copper King while deliberately providing information about the imposition process to the media. This was to exploit public sentiment against the haves or high earners and it was a character assassination of a particular taxpayer. Above all, the imposition was unjust in the first place with no sound logic.”

The fact that all the 6 outside members of the subcommittee for viability appraisal were against the imposition definitely shows the nature of the case. The rest 5 inside members are appointed by the National Tax Service.

According to the current law, part of compensation goes to a taxpayer if he or she wins the case in court. However, consultancy fees before filing a case are not a matter of consideration so the taxpayer must shoulder the burden of fees to prove him or her not guilty. This absurd situation is also the object of discussion.

The Copper King is known to have paid PricewaterhouseCoopers approximately 3 billion won as consultancy fees, excluding performance-related pay.

In case of the Ship King, he is reported to have paid Kim & Chang 10 billion won as consultancy fees against the imposition of 410 billion won facing the charge of offshore tax evasion made on 26 December last year.

Likewise, the National Tax Service can impose on anyone at any time they want forcing political and economic disadvantages and bringing disgrace on a particular taxpayer. Then, tax agencies or law firms take advantage of this. Besides, the National Tax Service had seized the Copper King’s assets in Korea before tax imposition applying ‘the Article 14 of Tax Imposition Law’.    

Therefore, the Copper King was not able to claim his right to his properties. His basic human rights were also violated because he was branded as a tax evasion criminal.

The media were criticised for reporting pending cases and amid widespread criticism. However there is still no guideline for ‘tax evasion reports’.

President Kim Sun-taek explained, “the Copper King case and the Ship King case are similar to that of tax investigations into the media companies in 2001. At that time, free circulation was ruled as entertainment spending, not advertising fees so the Tax Tribunal cleared the imposition.”

He also claimed, “The right to properties is one of the most important rights and must be protected as everyone is entitled to ‘Grundsatz nulla poena sine lege’ or the presumption of innocence until they are proved to be guilty. It is urgent to draw up guidelines on the tax evasion reporting.” Another claim of his that officials who circulate about taxpayers’ information must be severely punished attracts attention.  

Officials were punished in the past but after the change in law in 2009, similar crimes are on the increase. The Association claims that promotion opportunities must be taken from those officials and also consultancy fees must be fully compensated if the taxpayer is released without charge. Furthermore, new legislation must be made that a taxpayer should be able to file a suit for compensatory payments against tax officials with unjust imposition.

The Association also stresses the importance of regulations for punishing tax officials and high-ranking officers and politicians who give orders in case of tax investigation for the purpose of removing rivals, impressing performance or trying promotion, apart from usual working practices.  

Mr Kim Sun-taek said, “The Tax Supervisory Commission like the one in the USA is necessary in order to decrease political investigation cases and legislation to invalidate imposition is necessary if a particular investigation is proved to be political.”  

How the Copper King came to the throne?

The 56-year-old Copper King, Cha Yong-keu, started managing Kazakhmys in 1995, the largest copper company in Kazakhstan while working for Samsung C&T and he made Kazakhmys profitable in two years. In 2000, Samsung became the biggest shareholder with 45% and Mr Cha took the top management post.

In 2004, he took over most of the stake held by Samsung and one year later, he listed the company on the London Stock Exchange. The Next year, he made profits of over 1 trillion won by reselling the shares he had. In 2008, he ranked 843 on the world’s billionaires by Forbes, the US business magazine, with 1.4 billion dollars.  

The National Tax Service claimed that Mr Cha invested 400 billion won in real estates and shares through a company established in Malaysia, tax haven and he was a Korean resident as his wife frequently visited Korea.

On the other hand, Mr Cha claimed that he lived in Hong Kong and the UK for most of time and he only stayed in Korea for one month a year. Mr Cha was right and therefore his ineligibility as a Korean resident was proved right.

According to the Korean tax law, a Korean resident means the state of living in Korea or staying in Korea over a year. However, the following terms ‘When actual place of residence is Korea such as one’s families or properties are in Korea, he or she is a Korean resident even if living abroad” is a cause for controversy.

A number of tax experts in Korea see this case as unreasonable since the 6 members of the subcommittee for viability appraisal, excluding the 5 members appointed by the National Tax Service were against the imposition regarding his length of time staying in Korea.

According to those Korean media reports, the National Tax Service will relinquish the case against Mr Cha accepting the ruling of the court.