Media Firms Hit for Back Taxes

The National Tax Service will assess 505.6 billion won ($390 million) in back taxes from 23 major media companies after a series of recent investigations. The government agency is also considering whether to report to prosecutors six or seven newspapers suspected of evading taxes.

"The media tax probe, which began on February 8, is ended as of Tuesday, and we will inform the press companies of the outcomes, including the estimated amount of back taxes to be paid," said Son Young-rae, Commissioner of the Seoul Regional Tax Office.

"The total amount of evaded taxes was nearly 1.36 trillion won," Mr. Son said. "Of the total, we will first exclude deficits of the firms making no profit. Then, we will collect back taxes of over 505 billion won."

Mr. Son added that media companies and their affiliates would have to pay 322.9 billion won and individuals including large shareholders would be assessed 182.7 billion won. None of the press companies investigated was able to justify its tax accounting during the probes, he said.

None of the companies or individuals was named Wednesday.

The assessments included 68.8 billion won in corporate taxes on free promotional copies they circulated. The companies argue that they must distribute such copies for marketing purposes, but Mr. Son, citing the Fair Trade Act, explained that copies distributed in excess of 20 percent of their paid circulation would be treated as entertainment expenses, which are taxable. In general, marketing expenses are not taxable in Korea.

Additional investigations on some companies about inappropriate cash transfers and foreign remittances related to stock transactions were continuing, Mr. Son said. Since final investigations were not yet closed, reporting to prosecutors could be postponed for some time, he said.

The National Tax Service also plans to inform regional tax offices about confirmed cases of tax evasion by the media companies' business partners, including advertisement agencies, separately from collecting back taxes from the newspaper firms.

If the media companies seek to postpone the back tax payments because of the difficulty of paying such large sums at once, the tax service would consider the possibility, Mr. Son said.

The official announcement of the outcome of the investigation stirred up the expectable political controversy, pitted the ruling and opposition parties as adversaries.

"The outcome is striking the vulnerable spot of the newspaper companies, with an intention to tame the critical press and further reorganize the media companies," said Kwon Chul-hyun, representing the opposition Grand National Party.

Jeon Yong-hak, of the ruling Millennium Democratic Party, said in response, "It is shocking that some media companies were evading taxes by abusing the press - the public instrument of our society."

by Lee Hyo-joon