In 2013, a new coverage over a tax haven draw people’s attention on the issue. The media outlet examined records of Korean individuals or entities in the tax haven and announced the list of paper companies owned by Korean. With the coverage, practices of establishing Special Paper Company in so-called tax heaven were brought to light.
A tax haven is a state, country or territory which levies taxes at a low rate or not at all. For corporate entities or individuals, it could be very attractive to establish shell subsidiaries or move themselves to areas for reasons. Even though they do not need to reside a tax haven, those entities can take advantage of these countries’ tax regimes to avoid paying taxes in their home countries. In addition, it is impossible to apply domestic laws to these entities, a tax heaven is called ‘secrecy jurisdiction’ or ‘offshore jurisdiction.’ An offshore jurisdiction, therefore, is one that offers certain attractive instruments or opportunities for tax avoidance, and for asset protection. However, there are more complicated issues involving tax evasion and tax avoidance. Tax heavens undermine sound tax regimes and national economy.
Terms, ‘tax evasion’ and ‘tax avoidance’ should be closely examined to discusses legal issues over tax heaven, for example, whether tax avoidance is legal, while tax evasion is a crime from legal point of view. This paper will deal with tax heavens which are widely used by individuals and entities to avoid high taxes and their legal issues. Problems regarding tax heavens are not confined to traditional tax havens as increasing multinational companies take advantages of tax evasion and at the same time ways to do it have evolved. For these reasons, it will closely review element of crime of tax evasion and categories of punishment under domestic laws as well as legal issues at home and abroad. Lastly, it will discuss and present future directions of policies to effectively address issues over tax haven or secrecy jurisdiction.