NTS starts probe of tax evaders

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NTS starts probe of tax evaders

The 35-year-old head of a company reported earnings of 300 million won ($294,000) over the past four years and filed for no other additional forms of income. But he lived in a luxury apartment under a long-term rent deposit, known as jeonse, worth 1.6 billion won and has financial assets worth 800 million won as well as a golf club membership and other properties.

The entrepreneur allegedly borrowed money from his wealthy father, put it into several accounts, and supposedly used the funds to help start his business. When paying his father back, he only handed over a portion of the total amount he borrowed so it would appear on the books that there were financial transactions made between father and son.

But the son is accused of putting the remaining money into the high-end apartment jeonse and increasing his financial assets without paying any gift tax on the money that he received from his father.

In another case, a married couple claimed only 100 million won in annual income and also had a 1.5 billion won loan taken out in their name. Despite the huge loan compared to their small income, they not only lived in a luxury apartment with a jeonse worth 2.5 billion won, but also owned a high-end car and were members of a popular health club.

It turns out that the wealthy father of the 33-year-old woman had provided part of the jeonse deposit in cash and also took out a loan through his primary bank. Although the father repaid the entire loan, the daughter and her spouse allegedly dodged taxes on it by falsifying the documents so that it looked as though they still owed the bank for the jeonse.

A 34 year-old who doesn’t have a specific job lived the life he always dreamed of. Not only did he live in an apartment with a 1.2 billion won jeonse, but he also owned a 500 million won sports car and spent more than 100 million won in credit card purchases in a year.

His finances came from his father’s brokerage account that he reportedly has been managing for many years.

He withdrew the money from the account in cash so that it could not be traced by the tax authority and he then used the cash to pay for the jeonse and sports car while dodging the gift taxes.

These three are among a group of 56 that the National Tax Service (NTS) found to be dodging taxes in Seoul last year despite having received huge lump-sum jeonse loans from their parents or using capital that they created by not paying tax on incomes from their private businesses.

According to the NTS, jeonse money is not easy to track because neither the transaction date nor the total amount is reported to the local government, which fuels tax evasion.

The NTS said yesterday that it has started investigating 50 possible tax dodgers who committed similar offenses to the people caught last year. The tax agency said most of the evaders who will be investigated this year live in expensive neighborhoods in the greater Seoul area including Gangnam in Seoul and Bundang and Pangyo in southern Gyeonggi, where apartment jeonse prices are usually higher than other areas.

Last year, the tax agency tracked down 56 people whose jeonse exceeded 1 billion won, in popular residential neighborhoods in Seoul. The NTS issued them a total of 12.3 billion won in penalties for unpaid gift or income taxes.

The move is part of the Park Geun-hye administration’s campaign to penalize money laundering and tax dodging, which have largely been kept hidden.

“Last year we investigated only people who live in major neighborhoods,” said an NTS official. “This year, we widened the scope to include those living in the greater Seoul area.”

BY lee ho-jeong [ojlee82@joongang.co.kr]

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