Government Cracks Down on Tax Dodgers

The National Tax Service (NTS) has embarked on a forceful tax audit of the professional self-employed, including medical doctors, oriental medicine doctors and licensed tax accountants, who earn high incomes but who often don’t pay taxes properly.

The NTS said yesterday that it launched a tax audit of 422 high-income self-employed people in 16 business sectors who are suspected of tax evasion.

Lee Ju-Sung, the commissioner of the NTS, held a joint meeting of officials in charge of tax investigation in the agency’s headquarters and regional branches that day and directed them to concentrate their capacity on the issue of tax evasion by high-income professional self-employed people.

The NTS is planning to begin a full-scale tax audit next year after investigating this year’s 422 suspects to figure out what industries they are in, what regions they are located, the tax evasion methods used, and the degree of tax evasion of each region or group.

Medical Doctors Represent the Largest Group Among Those Investigated-

More than 40 percent of those who are subject to the tax investigation are high-income professionals. Among them are 94 medical doctors (the largest group), 38 lawyers, 25 licensed accountants, and 17 oriental medicine doctors.

Also being audited are 43 people in the wedding business, 40 shop owners in large-scale shopping malls such as Yongsan Electronics Market, and 33 owners of large-scale entertainment establishments including “room salons” and massage parlors.

The tax agency said that it would continue to conduct a tax investigation of those in related industries next year as well, leading to the prediction that the number of those subject to tax investigations will increase.

Lee said in a recent press conference, “Next January and February, we will mainly examine 39,462 self-employed people, including 6,813 professional workers, including lawyers and medical doctors, as to whether or not they evaded taxes.”

In-depth Investigation of Each Industry Continues Next Year-

This round of investigation will continue for a month and be focused on whether or not those investigated failed to pay the value-added tax, the income tax, and the corporation tax from January 2003 to the first day of the investigation.

The probe will also examine if the subject acquired property, including real estate, with the income they gained by hiding corporate capital or evading tax payments. It also includes an investigation into the source of capital, and if those probed transmitted property to their children without paying taxes.

Moreover, the NTS intends to trace financial accounts and clients in parallel, and report to the prosecution if it finds that those being investigated evaded tax payments through fraud or other illegal methods.

Han Sang-ryul, the head of the NTS investigation bureau, said, “This probe is a sample survey to figure out the types and situations of tax evasion in 16 industrial categories,” adding, “We will conduct in-depth tax investigations of each of the industries next year, based on the outcome of this probe.”

Doctor Avoids 300 Million Won in Taxes By Asking Customers to Pay in Cash-

The tax agency explained the background of the tax investigation by saying, “Tax evasion by the high-income self-employed is too serious to leave unsettled.”

Lee, a medical doctor who runs a skin and obesity clinic in Busan, evaded payment of about 300 million won in taxes after encouraging his customers to pay in cash by giving them a 20 to 30 percent discount.

Kim, a licensed accountant, is subject to the tax investigation for helping his customer, a cargo transportation company, issue a fake tax invoice.

Also among those subject to the investigation are 25 licensed accountants, certified public accountants, and tax agents who are suspected of informing taxpayers of how to evade tax payments or of helping tax evasion.

Jae-Seong Hwang jsonhng@donga.com