Even Without Ability, Annual Salary of 1.3 Billion Won...Tax Audit on 30 Children of Parents Using 'Parent Chance' Favoritism

National Tax Service Launches Tax Investigation into Suspects of Unfair Tax Evasion

[Sejong=Asia Economy Reporter Kim Hyunjung] The group owner Mr. A paid executives annual salaries of around 100 million to 200 million KRW, while he himself received a high salary ranging from 1.5 billion to 2.5 billion KRW regardless of business performance, and just before retirement, he even received retirement pay worth hundreds of billions of KRW. Additionally, he funneled profits by supporting manpower and technology to company D, controlled by his children B and C, while undercharging management support fees worth hundreds of billions of KRW. He is also suspected of irregularly using hundreds of thousands of dollars exchanged under the name of travel expenses for overseas stays such as his children's education expenses.

Owner E gifted all shares of his own company to his children and then sold prime land in Gangnam at about half the acquisition price. E is suspected of underreporting capital gains tax by fabricating a capital loss on the land transfer, and the children are suspected of failing to report gift tax on the benefit gained from the low-price acquisition.

The National Tax Service (NTS) has launched tax investigations into 30 suspects accused of tax evasion who monopolized corporate profits that should have gone to workers and shareholders or inherited large wealth through "parental chances" without their own efforts.

On the 27th, the NTS announced that it has started tax investigations into 30 suspects of unfair tax evasion in three categories: ▲monopolizing profits through high salaries and intangible asset manipulation (15 people), ▲irregular gifting through unfair real estate transactions (11 people), and ▲embezzlement of corporate funds for luxury and gambling (4 people). The total assets of the investigation targets were about 9.4 trillion KRW as of 2019, with an average family wealth of 312.7 billion KRW, and the average salary per owner was about 1.3 billion KRW, which is 35 times the average worker salary (37.44 million KRW).

Those suspected of monopolizing profits through tax evasion were found to receive excessively high salaries compared to other executives regardless of business performance or continued to receive payments under the title of advisory fees even after stepping down from management. They are also suspected of unjustly receiving large retirement pay by significantly increasing their salary just before retirement without reasonable grounds, and registering intangible assets such as trademarks and patents developed by the company under the owner's family name and embezzling high usage fees.

Those suspected of irregular gifting transferred land in areas with very high potential for value appreciation to their children at about half the market price, and transferred development sites and business rights to companies controlled by their children at significantly low prices or for free, then used other affiliates to successfully develop the business, thereby irregularly gifting real estate development profits. After gifting shares of real estate holding companies, they also sold prime land in Gangnam at a bargain price shortly thereafter to evade capital gains and gift taxes. Additionally, they secretly provided unpublished information such as listings and new product developments to irregularly support wealth inheritance. The amount related to unfair real estate transactions among the investigation targets totals 140 billion KRW.

Other cases include embezzling corporate funds by pretending to conduct normal transactions with companies under employee names, then purchasing luxury apartments and supercars, or using corporate funds irregularly for gambling.

The investigation confirmed that the targets increased their wealth faster than the parent generation using these methods. Among the investigation targets, the parent generation’s assets increased by 41.4% from 4.2436 trillion KRW in 2015 to 6.0018 trillion KRW in 2019, while the children’s generation assets jumped 50.7% from 2.1524 trillion KRW to 3.2445 trillion KRW during the same period.

Previously, a simultaneous investigation into tax evasion suspects involving private use of corporate supercars, which began in June last year, completed 24 cases and collected 103.7 billion KRW in taxes. Another simultaneous investigation into corporate fund outflows and unfair privilege tax evasion suspects, which started in November of the same year, completed 38 cases and collected 211.1 billion KRW in taxes.

An NTS official said, "We will focus our investigative capabilities to the fullest on unfair and privileged tax evasion such as private gain through abuse of superior position, and wealth inheritance through irregularities and privileges," adding, "If intentional tax evasion such as falsification of evidence or use of nominee accounts is confirmed during the investigation, we will strictly handle the case including filing charges under the Tax Offense Punishment Act."

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