The European Union came up with a list of 17 countries that it classed as tax havens on Wednesday. South Korea and the United Arab Emirates were among those countries, which the EU named (quote) "non-compliant jurisdictions."
The EU said South Korea has "harmful preferential tax regimes" and is not committed to amending or abolishing them.
"The EU took issue with tax benefits for foreign companies operating in free economic zones and the transparency of the companies' activities."
The EU further claimed countries on its list have not committed to implementing the OECD's new framework for tax evasion, or complied with international standards on automatic exchange of information.
South Korea's finance ministry slammed the EU's decision in a press release, saying:
being listed as a tax haven is "not in accordance with internationally agreed standards" as the EU had agreed to the international tax reform measures at the G20 summit back in February, and that imposing EU criteria on non-EU countries also poses the risk of "violating taxation sovereignty."
But what does being on the "blacklist" really mean for South Korea?
"If the Korean government decides to change tax regulation, transparency, then there's a potential that those already-existing foreign companies in free economic zone might move abroad Second is the blacklist would have a significantly negative impact on the European investment into Korea."
The expert adds that considering about one third of foreign investment into South Korea comes from the EU, the blow to the Korean financial market would be (quote) "not trivial."
(Stand-up: ed devin)
For now opinions differ on what should be done with the listed countries Some say they should face some kind of sanction, while others say being listed is motivation enough for them to reform. But one thing experts agree on is that the Korean government needs to act fast to minimize any negative impact on the local economy.
Lee Jeong-yeon, Arirang News