The South Korean government vowed all-out measures against what it claimed unjust and internationally-incompliant grounds of the European Union in shaming the nation’s name by blacklisting it among 17 countries and territories as tax havens.

In a press statement issued on Wednesday, the Ministry of Strategy and Finance said the EU decision was “not in accordance with the international standards, runs counter to an international agreement, and can undermine tax sovereignty.”

South Korea was included in the EU’s list of “non-cooperative tax jurisdictions” released on Tuesday along with 16 other countries. Brussels said the 17 nations on the list “failed to meet agreed tax good governance,” and Korea has “harmful preferential tax regimes and did not commit to amending or abolishing them by 31 December 2018,” in its press release.

The so-called “preferential” tax incentives the EU has found fault with referred to tax breaks the country offers to foreign tenants in free economic and investment zones across the nation, the ministry said.

The EU has imposed a different set of criteria in assessing tax evasions than the agreed guideline of the Organization for Economic Cooperation and Development (OECD) and G20 countries. The OECD’s base erosion and profit shifting (BEPS) project is applied only to industries with high mobility such as financial and service sectors, but the EU violated the standard by expanding the application to the manufacturing sector, the ministry said in a press release.

Moreover, Brussels broke its promise to comply with the evaluation standards of the OECD and G20 in February this year by including Korea which follows the BEPS rules in its list.

“Imposing EU rules on a non-EU member is also an act of violation of tax sovereignty of another state,” the ministry said.

Korea maintains effective information sharing channel with the other governments through comprehensive taxation agreements, the ministry said retorting to EU accusation on lack of transparency and information sharing.

EU said the blacklisted states and territories face potential punitive measures related to “foreign policy, economic relations, and development cooperation.”

By Yoon Won-sup and Choi Mira

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