Ministry of Industry Affiliates Imposed 135.3 Billion Won in Penalty Fines Over 5 Years... KEPCO 45.5 Billion Won

Payments by Institution: 25.4 Billion KRW from Kangwon Land, 23 Billion KRW from Hansuwon, 12.7 Billion KRW from Gas Corporation
Four Institutions Account for 79% of Total Charges... 83.2% of Penalties
"Excessive Charges Due to Public Institution Faults, Complacent Operational Practices"

[Asia Economy Reporter Kim Bo-kyung] It has been revealed that the penalty surcharges paid by agencies under the Ministry of Trade, Industry and Energy over the past five years amount to approximately 135.3 billion KRW. Penalty surcharges refer to additional taxes, fines, penalties, administrative fines, and charges paid due to institutional faults or errors.

On the 22nd, Yang Geum-hee, a member of the National Assembly’s Industry, Trade, and Small and Medium Enterprises Committee from the People Power Party, analyzed the penalty surcharge details of 40 agencies under the Ministry of Trade, Industry and Energy. The analysis confirmed that from 2015 to July 2020, these agencies paid a total of about 135.34 billion KRW in penalty surcharges.

Korea Electric Power Corporation (KEPCO) paid 45.5 billion KRW, Kangwon Land 25.4 billion KRW, Korea Hydro & Nuclear Power 23 billion KRW, and Korea Gas Corporation 12.7 billion KRW, each exceeding 10 billion KRW in penalty payments. These four agencies’ combined payment of 106.6 billion KRW accounts for 79% of the total penalty surcharges paid by all agencies under the Ministry. By type, additional taxes imposed for violations of tax laws accounted for the highest proportion at 83.2%.

In KEPCO’s case, it paid 38 billion KRW in additional taxes in 2017 alone for reasons including failure to fulfill the duty of faithful reporting and non-issuance of statements and invoices. The main subject of the penalty at that time was the retaining wall facilities of substations. KEPCO considered the retaining walls as part of substation equipment and classified them as reinforced concrete buildings under the Corporate Tax Act Enforcement Rules. According to the rules, in places with severe vibration or exposure to corrosive substances, the depreciation period for equipment can be calculated with a minimum useful life of 15 years.

However, the National Tax Service’s investigation found that the retaining walls were separate buildings from the main substation facilities and were not significantly exposed to vibration or corrosive substances. In this case, the asset is considered to have a standard useful life of 40 years, so the depreciation period can only be calculated up to 30 years, which is 75% of the standard useful life. Therefore, the depreciation period for the retaining walls was applied as 30 years, resulting in additional tax amounts and the payment of additional taxes.

Kangwon Land paid 22.7 billion KRW in additional taxes due to issues such as VAT on comp sales, timing of individual consumption tax expense recognition, input tax credit for convention hotel construction costs, and input tax credit for the Grand Hotel, following tax audits conducted in 2014 and last year.

Korea Hydro & Nuclear Power paid 13.8 billion KRW in additional taxes for reasons including not treating the spent nuclear fuel management charges as tax expenses at the time the Korea Radioactive Waste Agency issued the charges, disallowance of costs due to timing differences in recognizing litigation-related expenses, and depreciation on landscaping trees.

Korea Gas Corporation paid 10.3 billion KRW in additional taxes due to delayed issuance of sales tax invoices related to the reclamation work of the Samcheok base shared waters and failure to report acquisition tax on gas pipelines within the Samcheok base.

According to an audit conducted by the Korea Gas Corporation’s Audit Office, the current construction cost settlement work at Korea Gas Corporation heavily relies on manual processes because the 'standardization of completion details by work type' has not been preceded. This results in a time-consuming settlement process, making it difficult to report and pay acquisition tax promptly. It was revealed that unnecessary administrative and budgetary waste has been repeated annually.

The next largest type of penalty surcharge after additional taxes was fines, totaling 8.9 billion KRW, with Korea Hydro & Nuclear Power paying 7.5 billion KRW. Among the disability employment charges paid due to failure to meet mandatory employment quotas for persons with disabilities, totaling 8.8 billion KRW, Kangwon Land paid 2.7 billion KRW. Regarding traffic inducement charges imposed on facilities causing congestion under the polluter pays principle to alleviate traffic congestion, totaling 2.8 billion KRW, Korea Hydro & Nuclear Power paid 1.4 billion KRW, each recording the highest amounts.

Assembly member Yang Geum-hee stated, "The large amount of penalty surcharges paid due to institutional faults and the overwhelming proportion of additional taxes from tax audits reveal the complacent management practices of public institutions. It is necessary to thoroughly inspect management conditions and work processes and promptly address the issues."

This content was produced with the assistance of AI translation services.