A Seoul court has meted out a heavy punishment to an entrepreneur charged with offshore tax evasion. It sentenced Kwon Hyuk, chairman of Cido Shipping, to four years in jail and 234 billion won in fines for hiding money offshore to evade taxes. He was imprisoned immediately after the verdict.

The ruling, although not final, carries much significance as it comes amid a move by the National Tax Service to crack down on offshore tax evasion as part of its campaign to increase tax revenue.

Kwon, a reclusive shipping magnate, established Cido Shipping in Japan from scratch and expanded it into a company with a fleet of 175 large vessels. His personal wealth is thought to exceed 1 trillion won.

Although Kwon’s company is based in Japan, he has conducted most of his business in Korea. But to evade taxes, he used a typical method ― disguising himself as a non-resident.

The NTS conducted a tax audit on Kwon in June 2010 and found evidence that he had illegally raised slush funds. He received rebates from Korean shipbuilders and insurance companies in return for placing shipbuilding orders and purchasing insurance policies.

The tax office also found that the shipping tycoon evaded corporate and personal income taxes amounting to 900 billion won by smuggling out profits and personal wealth to foreign banks via paper companies set up in tax havens.

So the office imposed 410 billion won in income and corporate taxes on Kwon and referred the case to the Supreme Prosecutors’ Office for a criminal investigation. Prosecutors indicted him in 2011.

The Seoul Central District Court ruled that the suspect “inflicted huge losses on the state by evading taxes through intelligent methods.” It added that a heavy punishment was inevitable because he refused to admit his wrongdoing.

The court said Kwon should pay income taxes in Korea because the country has been his base of living. Kwon, who has obtained permanent residence in Hong Kong, tried to prove that he was a non-resident by showing that his stay in Korea has been shorter than six months a year except in 2007.

The court refuted his argument by noting that he carried out economic and social activities here, created huge wealth here and even benefited from social welfare services, such as the national health insurance.

The verdict against Kwon indicates the court will not exercise leniency toward offshore tax evaders. This is good news for the NTS as it seeks to tighten its noose on them.