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Shippers take up 85 pct of S. Korean firms in tax havens

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(Globalpost/GlobalPost)

SEOUL, June 4 (Yonhap) -- Nearly 85 percent of local firms established in tax havens are linked to the shipping industry, data showed Tuesday, raising concerns of excessive public distress over offshore local companies.

According to the data compiled by CEO Score, a corporate researcher, the country's 16 business groups have established 281 companies in seven major tax havens, with 238 of them linked to the shipping industry.

It is widely accepted for a shipper to establish offshore special purpose companies, especially when the company bids to acquire or borrow vessels, as it allows the firm to hedge against financial risks and gather investments.

"While the public considers companies that establish offshore branches in tax havens to dodge taxes, they are actually obligated to pay their duties according to the South Korean law," said Park Joo-geun, who heads CEO Score.

"It is unreasonable to consider all of offshore South Korean firms as tax evaders," Park added. "The top priority should be placed on sorting out illegitimate entities and individuals."

STX Group, a South Korean shipping conglomerate, held 94 special purpose companies in Panama, trailed by Hanjin Group with 79 firms and SK Group with 54 firms.

Other South Korean business groups also established affiliates in tax haven countries for legitimate business operations, with Samsung Electronics Co., the world's top smartphone maker, holding two corporate bodies there.

Last month, an independent journalists' group in South Korea revealed a list of high-profile local businessmen suspected of creating bogus companies in tax haven regions, implicating possible tax evasion or the running of slush funds.

The Korea Center for Investigative Journalism, a non-profit organization set up by former journalists, disclosed three names of heads of family-owned conglomerates in May, who allegedly set up paper companies to stash secretive money in the British Virgin Islands and the Cook Islands.

The organization also revealed Monday that Chun Jae-kook, the eldest son of former president Chun Doo-hwan who took power through a military coup in 1980, established a shell company in the British Virgin Islands in 2004, raising suspicions that he may have tried to stash away his father's massive slush funds.

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