Some key members of the European Union Chamber of Commerce in Korea expressed concerns on Monday about Korea’s tax authorities’ decision to levy a 4.5 billion won fine ($3.95 million) on the EUCCK for failing to report and pay income generated from its in-house magazine ad sales.

A senior member of the 26-year-old organization said the EUCCK may have to close its doors due to the heavy fine.

“Most likely, (the EUCCK) will not be able to pay, (as) it is close to bankrupt,” he told The Korea Herald, asking not to be named.

Under the current Korean regulations, he said, an organization must first pay the fine, then go to court. But for non-profit organizations such as the EUCCK, it’s very difficult to pay the fee in full.

“It’s a problem in the interpretation of the law. You should have the ability to go to court first (to contest the fine),” he said.

According to news reports on July 8, the Namdaemun branch of the National Tax Service issued the heavy fine after an investigation into the organization from February through June of this year.

The NTS found that the EUCCK had recently failed to file a tax invoice regarding the ad sales made from its magazine, “Infomag,” so the fine also includes back taxes.

The EUCCK’s magazine ad fees reportedly range from around 2 million won to 40 million won. Additionally, it also makes around 5 million won on advertorial interviews featured in Infomag, and over 10 million won on banners featured on the website.

Another senior EUCCK official told the paper that the organization did not understand why the heavy fine was being levied.

“We are a non-profit organization and we don’t know where this is coming from. We are not responsible for paying the (current) fee,” new EUCCK Secretary-General Wolfgang Slawinski said.

He said that the EUCCK plans to hold a board meeting later this week to discuss and “keep the communication channel open” between his organization and the NTS.

Slawinski added that the meeting may be postponed to next week due to many members currently being outside of the country, but said that the board members will work together to “figure out the best way to communicate” with Korea’s national tax arm.

Slawinski recently replaced Jean-Jacques Grauhar, who stepped down last month. The EUCCK board member also confirmed during the phone interview that the organization is downsizing and its Seoul headquarters will move from its Euljiro location to a new location near Gwanghwamun this month.

The EUCCK was founded in 1986. As a non-profit organization, it seeks to develop commercial, trade and industrial relations between Korea and the EU, according to its official website.

This is the first time in the organization’s history that it is being investigated for alleged tax evasion.

An NTS spokesman declined to elaborate on the issue on Monday, saying the issue was sensitive and it was necessary to maintain confidentiality.

By Renee Park  (renee@heraldcorp.com)