Tax Authorities Casting Wide Net in Battle to Rein in Usury

The government tax agency began special audits on Friday of private money lenders and private financial firms who charge exorbitant interests rates on loans to customers with credit problems. An agency official said it will search for evidence of income tax evasion through the audits, which are scheduled to last at least 40 days.

The National Tax Service said its agents seized records and papers of 155 private lending operations throughout the country Friday afternoon during surprise onsite visits.

The service said 78 lenders who have been linked to organized crime and 15 lenders who have been operating finance companies without official approval are included in the probe.

The lenders being audited include 20 who accept automobiles and real estate as security and 34 who allegedly used credit cards illegally to extend loans at usurious rates.

"Those persons or operations that are found to have resorted to violence, racketeering, forgery or other fraudulent activities as part of the contractual relationship with borrowers will be brought to the prosecutors' office for criminal prosecution," an agency official said.

The tax agency reported that 32 lenders have already been referred to the prosecutor's office. The official said investigations against these operations have been ongoing and there is enough evidence of tax evasion to warrant criminal prosecution.

The agency said it will establish a team of agents at local tax offices who will specialize in the investigation of usury by private lenders. The teams are currently taking tips on possible tax evasion by lenders, it said.

by Lee Hyo-joon