War Declared On Value-Added Tax Renegades

Businesses that commit tax fraud by falsely claiming value-added tax refunds will face criminal charges, a National Tax Service official said Wednesday.

Kim Ho-ki, who heads the agency's value-added tax division, said the service will begin tax audits early next month on businesses suspected of filing false claims.

Penalties for improper activities will include an added assessment of 10 percent of the tax refund claimed, Mr. Kim said. "Cases that are deemed serious will be reported to the prosecution for fraud," he said.

Mr. Kim said the focus will be on businesses that fabricate inventory figures to exaggerate purchases. "Wholesale and retail merchandising concerns that claim refunds for value added tax on purchases that they did not make will be the prime target of the audits," he said.

The refunds are also provided to businesses that manufacture products for export and those that list large materials, supplies or equipment as investments.

The agency will also scrutinize books of firms that filed smaller amounts in sales revenue compared with similar businesses and those that attached purchase receipts issued by firms customarily unrelated to the taxpayer company's business.

"We operate a computerized system that analyzes data on stages of value-added tax payments," Mr. Kim said.

The agency said value added tax refunds last year were more than 10 percent higher than the 10.6 trillion won ($8.1 billion) paid out in 1999.

by Lee Hyo-joon