Suspicion of a Kind of Deal between Acting Prime Minister and Administration

The National Assembly’s confirmation hearing committee continued Tuesday its investigation for the second day into allegations that acting Prime Minister Chang Dae-whan did not pay interest on 2.39 billion won he borrowed from the Maeil Business Newspaper, at which he served as president, and that he offered ‘some amount of money in return for a favor’ to the government when tax probes into media companies were conducted.

The hearing committee asked a total of 21 witnesses including the business newspaper’s executives, officials at a bank with which the acting prime minister has a bank account, and officials at the administrative office which has jurisdiction over the real estate owned by Mr. Chang about raised suspicions of tax evasion and violating laws.

The National Assembly is scheduled to put to the vote the confirmation of the acting prime minister on Wednesday when it holds a plenary session. About the issue, the Millennium Democratic Party (MDP) has decided its party line. Meanwhile, the Grand National Party has shown a negative response to the confirmation. Against this backdrop, whether the former newspaper president will be confirmed as prime minister is not clear.

At the hearing, Um Ho-seong from the GNP insisted, “Mr. Chang dodged interest income taxes on 1.67 billion won (the portion he borrowed in 2000) among his loan of 2.39 billion won from the Maeil Business Newspaper and that the interest he didn’t pay adds up to 491.56 million won.

Rep. Um pointed out that because he did not pay the interest on the 1.67 million won he borrowed from the company according to the corporation tax department of the National Tax Service, the money was considered as a bonus. So he should have paid the tax of 130.23 million won on the borrowed money in the form of withholding taxation at the source.

Rep. Song Gwang-ho from the United Liberal Democrats (ULD) said, “The newspaper’s audit report doesn’t include Mr. Chang’s loan from it. It seems that Mr. Chang had tried to conceal the fact that he received a large sum of loan from the company.”

Quoting a newsletter about stock information, Rep. Ahn Taek-su said that the Newspaper was charged an additional 13-14 billion won in taxes during the tax audit but it actually paid an extra 3 billion won. He insisted that the newspaper was exempted from paying 10 billion won in taxes through a back deal with the President.

Contradicting the argument by Rep. Ahn, Prime Minister designate Chang said that his borrowing from the company was made after the vote by the board of directors and it did not cause damage to the company.

“The interest Mr. Chang didn’t pay is posted as debt of Mr. Chang and reflected as interest revenue on the company’s books. The deal was legally made,” said Kim Hyang-ok, chief of the company’s accountants’ department, who stood before the hearing committee as a witness.

The prime minister designate contracted the allegations that there was a kind of back deal between Mr. Chang and the government and added that quoting an unreliable newsletter for stock information is very dangerous.

Young-Chan Yoon Jong-Hoon Lee yyc11@donga.com taylor55@donga.com