in all circumstances. The benefit of deferral should be restricted to those
situations in which it is justified by considerations of capital-import neutrality, that is, it should be given to subsidiaries that are engaged in bona
fide industrial activities such as natural resource development. Therefore, antiavoidance rules are necessary to prevent erosion of the domestic
tax base by differentiating income subject to high domestic tax rates from
tax haven entities subject to lower (or no) foreign taxes ( Arnold, 1986).
This chapter largely refers to the Korean economy during the period before 1988. Per capita GNP increased to $4,994 in 1989, to $5,659 in 1990, to $6,518 in 1991, and to $6,749 in 1992. GNP growth rates (in real terms) for those years are
6.8 percent, 9.3 percent, 8.4 percent, and 4.7 percent, respectively, down from 12.4
percent in 1988.
Gross commodity exports reached 59 percent in 1989, 56 percent in 1990, 55
percent in 1991, and 54 percent in 1992.
3. Korea has again become a capital-importing nation; balance of payments
(BOP) has deteriorated, as shown here (in billion won):
Korea's economy was strong until 1988. Since then, Korea has been plagued
with economic slowdown: rising wages, falling labor productivity, and eroding
export competitiveness in the wake of political and economic democratization.
There is a pessimistic economic outlook.
Korea Industrial Research Institute, A Survey on the Status of Technology
Transfer by Foreign Firms (Korean), February 1986.
According to the Asian Wall Street Journal, September 7, 1989, capital gains
arising from the transfers of shares among foreign-invested enterprises at home
and abroad amounted roughly to 364 billion won between July 1984 and July
The amount of exemption from the payment of customs duties associated
with the FCIA reached about 19 billion won in 1985, according to Report on Korea's Tariff System Development by the
Tax System Development Deliberation
Committee, December 1986.
The reported cases of alleged corporate tax fraud are few in Korea. In March 1987, the tax authorities ordered the Seoul branch of Westinghouse Inter
Questia, a part of Gale, Cengage Learning. www.questia.com
Book title: Taxation and Economic Development among Pacific Asian Countries.
Contributors: Richard A. Musgrave - Editor, Ching-Huei Chang - Editor, John Riew - Editor.
Publisher: Westview Press.
Place of publication: Boulder, CO.
Publication year: 1994.
Page number: 191.
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