Big businesses are expected to face stringent tax audits and probes by the country’s tax agency following a state auditor’s demand for strengthened tax regulations.
The National Tax Service said that it plans to boost its tax inspections on companies with sales of more than 50 billion won ($44.2 million), which amounts to about 1,170 enterprises in the country, as well as increase the duration of its regular audits to six to eight months from the current three to four months.
The tax collecting agency has, to this end, expanded the number of its auditors, while providing a bigger award to those with inside information on companies allegedly evading tax payments.
Also, the Board of Audit and Inspection had pointed out that the Ministry of Strategy and Finance and the NTS failed to properly enforce a law levying gift taxes on conglomerates which furnish most of their contracts to founders of their subsidiaries, who also happen to be family members of their group owners.
The state auditor urged the tax agency to improve measures on gift taxation and devise a reasonable guideline on such tax levies on nine conglomerates, including Hyundai Motor, SK and Lotte which are known for transferring operational ownership to their subsidiaries owned by relatives.
This comes as the incumbent government seeks to secure 135 trillion won over the next five years of President Park Geun-hye’s term to finance welfare projects mostly through stricter tax levies.
It is also eyeing greater monitoring of the superrich and private-business people in the black market who have evaded taxes by boosting its financial information system, enabling transparency of transactions for taxation on unofficial currency traders, money lenders and gas distributors among others.
The gift tax, which was introduced during the former Roh Moo-hyun administration as a means to prohibit illegal transfers of ownership between family members associated with chaebol, would also be used to increase state revenue.
Korea’s tax probes on companies remain low when compared to other advanced countries. Only about 1 percent of companies are scrutinized over their taxes, compared with 1.33 percent in the U.S. and 4.17 percent in Japan per year.
