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South Korea businessmen are on a bender

Corporate spending for entertainment in South Korea is in the news. Expenses for booze and apparently other nighttime activities are deductible, so the National Tax Service can track bar bills through tax returns.

“South Korean firms every year are spending more on entertaining business partners,” the Wall Street Journal said last week, “with total corporate expenses on entertainment rising about 17% to 8.8 trillion won ($8.64 billion) in the three years to 2012, according to data from the National Tax Service released . . . by a ruling-party lawmaker. The figure from last year, unreleased at the time of reporting, is expected to rise beyond 9 trillion won, a tax-agency official told national media.”

Ahn Chang-nam, a tax professor at Kangnam University, told the WSJ that protocol requires smaller contractors pay for lavish entertainment in the hope that it will help them secure business deals.

And there’s “no shortage of pricey—and sometimes shady—night time entertainment in South Korea,” the story said.

The highest-end venues include hostess bars known as “room salons;” “yojeong,” a traditional Korean bar where a local variety of a geisha-like services is available; and karaoke bars where female or male company can be purchased by the hour.

Separate data on corporate-card payments at the venues showed a decrease in spending by about 20% from the peak in 2010.

Prof Ahn said “one possibility for the decline in corporate card payments is a rise in use of personal credit cards or cash, with employees claiming reimbursement,” the WSJ reported.

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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