The 88 Billion Dollar Deposit
New Frontier rang! When Yoo Jae-won arrived at the office early in the morning and stepped into his personal office, the phone immediately began to ring. “Perfect timing!” It was as if the caller had been watching from outside and dialed the moment Yoo Jae-won entered the Yeoju office. Normally, his executive secretary Kim Dae-seok, who accompanied him up to the office, would answer first, but the timing of this particular call was so precise that Yoo Jae-won picked up the receiver himself.
“Hello? This is Yoo Jae-won.”
—Mr. President, it’s Choi Kang-wook! The reason the timing was so precise became clear. Choi Kang-wook knew Yoo Jae-won’s arrival schedule better than anyone, so he had called right away. The fact that he was calling this early suggested something major had happened. Had a critical bug appeared in one of ID Technology’s released products?
“Yes, what is it?”
—A little while ago, the Export-Import Bank contacted us about a large incoming wire. When we checked, an enormous sum had been deposited, so I wanted to confirm it with you, sir.
Yoo Jae-won immediately understood. “Ah, the sender is ID Investment and the amount is 8.8 billion, correct? That’s the settlement money.”
He spoke casually about 8.8 billion, but the unit was different from ordinary deposits. It was 8.8 billion U.S. dollars.
—Excuse me? Settlement money? Surely not. Wasn’t it 1.6 billion until recently?
“I told you afterward that I was going to bet on the decline. The rise was excessive.”
Once the investment direction had been decided, Yoo Jae-won hadn’t gone into detail with Choi Kang-wook. He had mentioned making some money in the recent downturn, but Choi hadn’t known the exact figure. Seeing the deposit arrive today, he seemed stunned by the sheer scale.
—Good heavens! Choi Kang-wook’s exclamation was once again “Good heavens.”
“But this money isn’t entirely ours. We have to pay taxes on it. I’d like to discuss that point today. Join me on ID Talk.”
—Understood.
The tax policy adopted by most countries was simple: profits were taxed without exception. Korea was no different, and neither was the United States. ID Investment, which had earned a massive 8.8 billion dollars in investment gains, was naturally subject to taxation. Still, Yoo Jae-won had options.
When he powered on the Egg PC, the boot sequence began at once. Because the operating system was lightweight, the desktop appeared after only a few hard-disk accesses. Yet something new now occupied the desktop that hadn’t been there before: a login screen. A standard prompt requesting a user ID and password had been added—the new feature distributed through Android Alpha’s final patch. Users could choose whether to enable the login screen; once activated, it could not be bypassed without the password.
The name “final patch” had been chosen because support for Android Alpha was ending. Alpha was now complete, and Android 1.0, built on a Unix-based kernel, would be released soon. Although the kernel was Unix, the ribbon interface made the visual appearance identical to Alpha. All the features added through patches remained fully usable, including Glide X. Internally, however, the entire kernel had changed, so DOS-based programs could no longer run directly. Software vendors would have to recompile their applications for Android 1.0. Source code written in standard C required only minor adjustments, while code relying on DOS-specific tricks would need those sections rewritten.
Programming guides and compilers for Android 1.0 had already been distributed to developers and major software companies. In addition, Android 1.0 would ship with a rich set of built-in applications—music player, internet browser, calculator, scheduler, paint program—and several games, minimizing any shortage of software.
Yoo Jae-won entered his ID and password. The lock screen vanished, the familiar desktop appeared, and a short welcome message played: “Welcome back, Commander.” He launched ID Talk at once. A private chat room had already been created. Choi Kang-wook was present, as was Vincent Greenhill of ID Investment, who had not yet left for the day.
One of ID Technology’s meeting rules was straightforward: when only Korean employees were present, Korean was the default language, but if even a single American employee joined, English had to be used exclusively. Deliberately excluding American staff to avoid speaking English earned a warning. A single warning did not seriously affect daily work, yet it influenced performance evaluations, reducing holiday and year-end bonuses and potentially hindering promotions. The policy was inconvenient for employees who suddenly had to study English, but ID Technology’s business spanned the globe; there was no alternative. As a result, departments that collaborated with the U.S. organization or hosted dispatched American staff were currently swept by an “English wind.” On the positive side, the company provided generous learning support subsidies for anyone studying English.
—I’ve already heard the explanation from Chief of Staff Choi. I’d like to hear your policy, sir.
Choi Kang-wook, one of the first to charge onto the English front line, had now reached a level where he could communicate adequately. His academic prowess—entering a top university and passing the bar exam in a single attempt—had clearly not dulled.
“My principle on taxes is clear. No tax evasion. As for tax reduction, we keep it at a level anyone would consider reasonable.”
He would reduce the burden as much as possible, but he would not push reductions into the realm of evasion. At the same time, he had no intention of paying the full amount when legitimate deductions were obviously available.
“Let me ask a simple question. ID Investment is structured as a global corporation and can be recognized as such in the United States, correct?”
—Yes. The Manhattan branch is registered as a U.S. business entity, but the headquarters is reported as being in Korea.
“The advantage of a global corporation is that we can choose where to pay taxes. Please calculate the tax burden for both the United States and Korea.”
Choi Kang-wook began calculating the Korean corporate tax, while Vincent Greenhill handled the U.S. side. When the numbers were clean, tax calculations became as simple as arithmetic, and this case—where profit and cost figures were precise—made the task even easier.
—Well, the United States looks less favorable. The current U.S. capital-gains tax rate is 28 percent. Some reduction is possible through donations, but even at the lowest feasible rate we would still owe approximately 2.46 billion dollars.
Vincent Greenhill, who found calculations straightforward, answered first.
—In Korea the statutory corporate tax rate is 30 percent, but after applying the deductions our company currently receives, it drops to 24 percent. That comes to 2.11 billion dollars.
The raw percentages did not appear dramatically different, yet because the amounts were so large, reporting the income in Korea would save 350 million dollars—roughly 250 billion Korean won.
“Then the conclusion is simple. Report it in Korea.”
—Understood.
—Hmm, that is……
Vincent Greenhill answered promptly, while Choi Kang-wook left room for further discussion. The chief of staff was likely concerned about non-tax issues surrounding the repatriation of the WTI investment profits. Yoo Jae-won could easily guess what those concerns were: the possibility of public criticism and the risk of being exploited by the ruling party or the president amid Korea’s murky political climate. Yet Yoo Jae-won felt no great anxiety on those points. Although Korean politics remained somewhat backward, the president himself was an ally. During Chuseok the Blue House had sent gifts, accompanied by a short handwritten note wishing him a pleasant holiday and continued business success. The message was brief, but the goodwill was unmistakable.
More importantly, while modest sums could be seized, capital on a truly enormous scale generated its own protective power. Once ID Investment—already recognized as Korea’s first investment bank—brought 8.8 billion dollars from the United States and paid 2.1 billion dollars in taxes, the public reaction would far exceed any praise Yoo Jae-won had received so far.
—I’ll wire the funds as soon as the bank opens for business tomorrow.
Vincent Greenhill answered crisply and logged out. Although American, he showed no interest in where the taxes on the investment profits were paid. In fact, he had argued more strongly than Choi Kang-wook for reporting in Korea, since the Korean rate was lower. Having spent decades on Wall Street at the forefront of advanced capitalism, Vincent’s thinking centered on capital itself rather than nationalism. He even expressed a measure of respect for Yoo Jae-won’s willingness to favor Korea simply because he was Korean.
—There will be considerable talk in the United States.
Choi Kang-wook, by contrast, remained full of worries. He had already fretted over Korea’s backward politics; now he was concerned about the American reaction.
—If 8.8 billion dollars is withdrawn directly to Korea, the IRS—more fearsome than the FBI—will immediately dispatch agents to investigate.
“The IRS! They’re certainly intimidating.”
The IRS held every authority related to tax collection in the United States. Yoo Jae-won had personally experienced its fearsome reputation in his previous life. When he had earned some income in America and needed to file, he had prepared documents hoping to claim various deductions. After completing every preparation, he sat down to fill out Form 1040—seventy A4 pages of forms, largely because of the numerous receipt-attachment sections. Compared with Korea’s simple filing process, it had been overwhelming. In the end he had given up trying to do it himself and paid a tax preparer. The accountant had taken a substantial portion of the deductions, but it was still better than receiving none.
The IRS’s fearsome tradition stretched back decades. Al Capone, the lawless king of the Prohibition era, had not been brought down by the FBI; the decisive blow had come when the IRS caught him for tax evasion.
“Still, it’s fine. We haven’t evaded taxes at our U.S. operations, and we haven’t broken any laws. Besides, the United States prides itself on being the evangelist of capitalism. It tells every country to adopt capitalism as the global standard. What it values most is the free movement of investment capital across borders. Complaining about capital flight under these circumstances would be self-contradictory. They won’t be able to stop us after everything they’ve said.”
American investment capital had already reached enormous scale. Moreover, hedge funds founded by legendary investors such as George Soros and Robertson were operating at full strength. Their assets ran into hundreds of billions of dollars; moving 8.8 billion to Korea was a trivial matter for them.