Focus of FTC (Fair Trade Commission) NTS (National Tax Service), which are two major ‘Grim Reapers’ in South Korea’s financial industries, is going to be shifted from ‘major corporation’ to ‘midsize business’ that has been in a blind-spot of FTC and NTS. Their target is going to be on midsize businesses that have been able to avoid surveillance of South Korean Government due to their size even though they have been making unfair profits from unfair transactions and tax evasion.
Industries are interested on whether this move by FTC and NTS is also taking place within other government departments as well as FTC and NTS are taking a similar action at the same time.
As a result, some of industries are concerned that such action by FTC and NTC can lead to ‘increased anti-corporate sentiment by South Korean Government’.
According to ‘online incident processing system’ operated by FTC, FTC only sanctioned two private companies for their unfair actions within the past 5 years.
This statistics is contrast to how FTC has been focusing on major corporations for related party transactions and unfair actions for many years as part of its plan on economic democratization. Even these two companies ended up having to pay no fine (Samyang Food) or receiving just a warning (Sajo Industries) by the court.
FTC also recognized that it has been focusing on major corporations for few years. It tightened up regulations and surveillance on companies with more than $4.40 billion (5 trillion KRW) and $8.80 billion (10 trillion KRW) in total assets. After Chairman Kim Sang-jo of FTC was appointed, establishment of ‘conglomerate bureau’, which was the top priority task for FTC at that time, was also part of FTC’s plan to tighten up its surveillance on major corporations.
However, there has been a hint of change by FTC recently. Chairman Kim announced that FTC would conduct investigation on groups with less than $4.40 billion in total assets while announcing this year’s plan for FTC. He explained that this year’s investigation on major corporations for related party transactions would not meet the level of last year’s investigation.
“Although businesses with less than $4.40 billion in total assets were not completely out of our regulations, it is true that they were somewhat in a blind-spot.” said a representative for FTC.
NTS has also started a tax investigation on ‘hidden businesses with major assets’.
Out of 95 people that were under investigation, 37 of them were family members of owners of midsize businesses. NTS announced that it lacked opportunities to investigate family members of owners of midsize businesses compared to family members of owners of major corporations. Out of entire South Korean businesses, only 0.7 to 0.8% of them actually go through tax investigation by NTS. Fact that NTS selected a particular group indicates that this is actually is a big issue.
“It is true that it is difficult to include midsize businesses, private companies, and companies that are not exposed to the media under our tax investigation.” said a representative for NTS. “We know that there has been quite a few incidences where these businesses violate laws by abusing the fact that they do not really go through our tax investigation.”
“Although midsize businesses have been able to avoid sanctions by receiving fewer interests than major corporations due to their size, it seems that FTC and NTS have decided to tighten up their surveillance in areas with significant number of harmful consequences.”
However, some are concerned about negative atmosphere forming around entire South Korean businesses as FTC and NTS have both put their targets on ‘hidden midsize businesses’ at the same time.
“We are concerned about FTC and NTS focusing on midsize businesses in addition to major corporations leading to anti-corporate sentiment.” said a representative for the industry.
Staff Reporter Yoo, Seonil | ysi@etnews.com