Teen Stock and Cash Gifts → Twenties Favoritism in Business → Thirties High Salaries and Dividends... "That's How You Become a Gold Spoon"

National Tax Service Conducts Tax Investigations on 30 Individuals for Monopoly of COVID-19 Windfall Profits and Illicit Inheritance Tax Evasion

[Sejong=Asia Economy Reporter Kim Hyunjung] Owner A anticipated that the stock price of pharmaceutical company B within the group, which is planning to go public, would surge after the listing, and leaked internal information about the upcoming IPO to their children. The children acquired shares of company B just before the listing and enjoyed massive short-term capital gains from the stock price increase. Additionally, the main affiliate C provided unfair support by purchasing raw materials from affiliate D, controlled by the owner's children, at prices higher than market value.

Owner E received tens of billions of won in salary from controlling company F, more than twice the amount paid to executives in the same position. When liquidating an overseas local corporation, they privately used golf club memberships worth tens of billions of won, which were assets subject to liquidation. Furthermore, they paid an overseas student child, who had never actually worked, a salary in the hundreds of millions of won, allowing the child to use it for living expenses abroad.

On the 9th, the National Tax Service announced that it has launched tax investigations into 30 suspects, including large corporations and high-net-worth individuals, for allegations such as illicit wealth succession, private benefit appropriation, and tax evasion.

The investigation targets include ▲12 suspects accused of tax evasion by illicitly appropriating windfall profits from booming sectors during COVID-19 such as IT, real estate/construction, and luxury goods, through high salaries/dividends and purchases of supercars and luxury homes under corporate names ▲9 suspects accused of illicit management succession by establishing cradle companies such as limited liability companies under the names of owner’s children, providing business opportunities, and unfairly supporting children’s corporations through preferential transactions ▲9 medium-sized companies mimicking large corporations’ tax evasion behaviors through unconventional capital transactions using new financial products.

The subjects of the investigation showed an increase in monthly average sales from 706.3 billion won to 751.4 billion won, a 6.4% rise, between 2019 and 2020. The total family wealth was 9.3 trillion won as of 2020, averaging 310.3 billion won per family, marking a 30.1% surge over the past five years. The wealth of the owner’s children generation under investigation increased by 39.0%.

Those accused of tax evasion by appropriating COVID-19 windfall profits used corporate profits gained from relative booms during the pandemic to purchase corporate-owned supercars, luxury resorts, and expensive artworks, which were privately used by the owner’s family or diverted through high salaries, bonuses, and dividends. The investigation subjects owned assets such as limousines worth up to 700 million won, a detached house worth 8.4 billion won (in Itaewon-dong, Yongsan-gu), and condominium memberships worth 2.6 billion won. The total value of luxury assets owned by the investigated corporations includes 14.1 billion won in supercars and yachts, 38.6 billion won in luxury homes and villas, and 218.1 billion won in high-value memberships.

Those accused of tax evasion by funneling wealth to their children mainly established limited liability companies without disclosure obligations under their children’s names, transferring business opportunities and unfairly allocating work through practices such as preferential transactions, subcontracting, and inserting their children’s companies into supply chains. They also provided illicit support by transferring business operation rights and real estate to corporations controlled by the owner’s children at low or no cost, or by purchasing intangible assets at inflated prices and excessively paying usage fees. Kim Dong-il, Director of the National Tax Service’s Investigation Bureau, explained, "The pattern shows that in their teens, they receive corporate stocks and seed money through parental support; in their twenties, they inflate stock value through preferential transactions and business opportunity provision; and in their thirties and forties, they easily increase wealth through high salaries and dividends."

Cases of medium-sized companies mimicking large corporations’ tax evasion through unfair capital transactions and offshore tax evasion were also uncovered. After issuing convertible bonds with call options, the corporation grants call options to the owner and their children (while the corporation waives exercising them). The owner then purchases the convertible bonds at a price lower than market value (equivalent to the conversion price) and converts them into shares at the time of a stock price surge to gain capital gains. Additionally, the owner’s family disguised overseas undisclosed funds as offshore funds to conduct indirect transactions of affiliate stocks and underreport profits, or siphoned corporate profits overseas through unfair transactions with overseas corporations held under borrowed names.

Director Kim emphasized, "If intentional tax evasion is confirmed during the investigation process, such as document forgery or use of borrowed-name accounts, we will strictly respond by filing charges under the Tax Crime Punishment Act."

Meanwhile, the National Tax Service has investigated a total of 5,039 cases related to unfair tax evasion over the past four years (2017?2020), collecting 9.3257 trillion won in additional taxes.

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