SEOUL – South Korea’s finance ministry said on Wednesday its inclusion in the tax haven blacklist, recently adopted by the European Union, was against international standards.
To fight tax evasion, EU finance ministers had adopted on Tuesday for the first time a blacklist of tax havens, which includes 17 countries and jurisdictions, including South Korea.
“Korea has harmful preferential tax regimes and did not commit to amending or abolishing them by Dec. 31, 2018,” the Ecofin Council said in a statement.
According to a statement published Wednesday by the South Korean finance ministry, the EU has classified the country’s tax regime (of exemptions) for foreign companies in special economic zones and other designated zones as a preferential regime.
However, Seoul believes that the decision flouts international standards such as those set by the Organisation for Economic Co-operation and Development and are also against certain international agreements.
South Korea believes that as per OECD’s Base Erosion and Profit Shifting project, the support system for investment in South Korea cannot be classified as preferential regimes.
It added the EU has extended the focus of implementation to the manufacturing sector when, according to Seoul, the criteria of the BEPS is usually limited to financial and service sectors.
The 17 territories included in the list will be subjected to community and national sanctions, although member states are yet to agree on country specific actions against the blacklisted jurisdictions.
South Korea signed a free trade agreement with the EU in 2011 and considers the bloc one of its main trading partners.