Tax Haven

Imagine someone opens a big bakery in the middle of a busy downtown and earns tens of millions of won every day. But the bakery's name and the rights to its secret recipe are owned by the baker's own company, set up on a southern island with no taxes at all. Each year, the bakery sends that company a huge 'license fee.' So the bakery's books show almost no profit, and the money piles up on the tax-free island.

This is the classic way a tax haven gets used. In places called tax havens, such as the Cayman Islands or Bermuda, thousands of company nameplates are crammed onto a single building. Not one real employee works there. These are shell companies (paper companies), which exist only on paper.

Multinational companies earn enormous sums in their home countries, yet they register key patents and brand trademarks with these shell companies. Then they say, 'We paid the island company a big fee for using the trademark,' and move nearly all their profit on paper to the tax haven.

Using a tax haven is not always a crime that sends you to prison. Each country has different tax laws, and tax avoidance techniques have grown up that slip through the gaps in those laws to cut taxes while staying inside the rules.

For example, some global IT companies built complicated deal routes that link Ireland, the Netherlands, and Caribbean island nations like stepping stones. This let them wear a mask of legality and push their corporate tax close to 0%. Even if it was not against the law, they have been criticized for paying almost no tax in the countries where they actually earned the money.

Tax havens can also become a breeding ground for plainly illegal tax evasion, such as laundering the dirty money of criminal groups or hiding slush funds. Walking this thin line between legal and illegal, huge amounts of money from all over the world have flowed into tax havens.

Tax havens are seen as a problem because countries end up collecting less tax than they should. When giant companies and the very rich pay less, the money for building roads, hospitals, and welfare gets tighter.

Some also point out that the burden on other taxpayers may grow to cover the shortfall. To stop this, more than 140 countries came together and agreed on a solution: the global minimum tax. Any big multinational with annual revenue of about 1 trillion won (750 million euros) or more must pay at least 15% tax, no matter which country its companies are based in. However, under a further agreement in January 2026, groups of US-based companies whose home tax rules are recognized as strict enough were exempted from some of its rules.

Tax authorities in different countries now also share financial information automatically, so the tax havens' biggest weapon, secrecy, is quickly breaking down. A safe haven where money can be hidden is slowly disappearing from the planet.