NTS goes after affluent cheaters

The National Tax Service on Monday said it is looking into possible tax evasion by 203 well-heeled people, including franchise owners, loan sharks and popular lecturers at cram schools, or hagwon, using analysis from its financial intelligence unit in cooperation with local governments and prosecutors.

In one case, a loan shark allegedly lent money to credit delinquents with annual interest rates of between 400 and 2,000 percent.

The loan shark threatened borrowers who had trouble paying back the loans and destroyed his accounting records as well as the promissory note to avoid reporting that income to the tax agency.

With the unreported income, the loan shark allegedly bought an expensive apartment under his wife’s name and high-end imported cars. The NTS has billed him 3 billion won ($2.66 million) in unpaid tax and filed a criminal complaint against him.

In another case, the tax agency uncovered an owner of a high-end hagwon didn’t report tuition payments and parked them in a bank account opened in an employee’s name.

The owner also allegedly embezzled the hagwon’s revenue by paying a salary to his wife, who did no work. The tax agency slapped him with a 1 billion won penalty for corporate tax evasion and recommended he be prosecuted.

The agency said it is targeting those who try to evade tax payments by opening accounts in other people’s name or falsify documents to conceal rental or cash incomes.

Another case involved an interior design architect who offered discounts to clients who paid in cash. He didn’t issue receipts, which is required by law, and allegedly didn’t report his entire income.

“We’re not only looking into a person’s personal information but also investigating family members and people that are close to the suspect in tracking down the means that were used in building up their fortunes,” said Kim Myung-joon, auditing bureau chief at the NTS. “We will take strict actions against those that have been found to have purposely dodged tax payments.”

Kim said the agency will try to refrain from auditing small private businesses like restaurants and convenience stores that are facing financial difficulties. It will toughen up its investigations of high-income earners who can abuse their power over people in vulnerable positions such as franchisees, tenants and loan borrowers.

The agency said in the last five year it has slapped unpaid taxes bills worth over 3.86 trillion won on 5,452 high-income earners and recommended criminal prosecution of 395 for tax evasion.

The agency said last year unpaid tax bills reached an all-time record. Last year 1,107 were investigated and 940.4 billion won in tax bills were levied.

In one case, a franchise owner opened up franchises in the name of his employees and didn’t report cash revenues, which he allegedly used for personal purposes, including buying real estate.

The tax agency last year slapped him with a 50 billion won unpaid tax bill.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]