 |
|
Samsung Electronics Chairman Lee Kun-hee is shown resting in a VIP room on the 20th Floor of the Samsung Seoul Hospital after suffering a myocardial infarction on May 10, 2014. (scene from the May 2015 video The Fact)
|
Samsung Electronics Chairman escaped punishment through voluntary disclosure
Samsung Electronics Chairman Lee Kun-hee, the majority shareholder in Samsung Life, reported concealed overseas bank accounts to tax authorities through a voluntary reporting system for unreported overseas earnings under the Park Geun-hye administration. Attention is now focusing on what effect this will have on Lee’s eligibility to be Samsung Life’s largest shareholder. Lee’s report of unreported overseas financial accounts was made to tax authorities through a limited-time voluntary reporting system operated by the Park administration, Financial Services Commission (FSC) and Ministry of Strategy and Finance (MOSF) sources reported on Nov. 27. The system was implemented for a six-month period from Oct. 1, 2015, to “legalize the underground economy.” Individuals reporting concealed overseas assets to authorities during this time received exemptions on surtaxes and fines, as well as reduced criminal penalties for tax evasion and violations of foreign-denominated transaction reporting requirements. According to the National Tax Service (NTS), a total of 123 concealed overseas accounts and 2.1342 trillion won (US$1.96 billion) were reported during the period. Lee was not criminally punished following his report. Financial Supervisory Service (FSS) insurance permit team leader Seo Jeong-bo explained, “Details on Lee’s criminal punishment were examined during a May review of his Samsung Life majority shareholder eligibility, but nothing was found.” The lack of punishment is being read as reflecting the leniency pledged by the administration for voluntary reporting. The question now is whether Lee will be able to hold on to his eligibility to be Samsung Life’s largest shareholder now that his concealment of assets overseas has come to light. The Act on the Improvement of Financial Company Governance Structures (Improvement Act) prohibits the exercise of voting authority for majority shareholders with 10% or greater ownership of a financial company if they have had a sentence of financial penalties or more for violation of the Procedure for the Punishment of Tax Evaders Act or Foreign Exchange Transactions Act. Lee owned a 20.76% share of Samsung Life as of late September. By the terms of the Improvement Act, Lee would be barred from exercising voting rights for the 10.76% difference beyond 10%, which would make Samsung C&T the de facto Samsung Life majority shareholder with a 19.34% share. The FSC maintains that restricting Lee’s voting rights would be difficult. Not only did Lee avoid a fine or greater punishment for his ownership of concealed overseas accounts, but even if he were to have such a sentence upheld for the accounts, the accounts were reported prior to the Improvement Act’s enactment on Aug. 1, 2016. “We held a legal interpretation committee meeting in May on the conditions for applying the terms of the Improvement Act. The conclusion at the time was that the standard should be the date of the criminal activity, not the date on which the sentence was confirmed,” an FSC source said. But some government officials said the window of possibility for measures against Lee may not be closed. “Based on Justice Ministry opinions, criminal punishment was not waived when developing incentives for voluntary reporting [leniency on surtaxes and criminal punishment],” an MOSF official said. “There is a strong possibility that people with large amounts of concealed overseas accounts or assets may not have reported them voluntarily,” the official added. An FSC source said, “If an investigation by tax authorities were to reveal that Lee only voluntarily reported some of his concealed accounts and is still operating the others, criminal punishment and attendant voting rights restrictions would be possible.” Democratic Party lawmaker Park Chan-dae argued, “Even if Lee did not have a fine or greater sentence upheld, his voluntary report itself is an admission that he violated the relevant law. The FSC should take measures to restrict Lee’s voting rights on that basis alone.” By Kim Kyung-rak and Bang Jun-ho, staff reporters Please direct questions or comments to [english@hani.co.kr]
