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Tax Auditors Target Home Builders

Posted November. 17, 2006 06:55,   


The National Tax Service (NTS) has begun a tax investigation into four construction companies, drawing public attention to the cause of the inspection.

According to the construction industry on November 16, the NTS recently launched an unexpected probe into four construction companies: Halla Engineering & Construction Corp., Byucksan Construction and two medium-sized companies.

The companies said NTS officials raided their offices and seized their accounting books.

Halla has been criticized for setting high prices for apartments to be built in Paju New Town, north of Seoul, last September. At that time, it sold the yet-to-be-built apartments for between 12.57-14.99 million won, around 4 million won more than other apartments in the area. The builder was accused of having triggered surges in apartment prices in the neighboring zones.

The company is very anxious that the investigation is part of the government’s measures to cut housing prices to effectively implement its recent real estate policy announced on November 15.

Some in the companies complained the central government’s tax investigation is too much pressure for them since the local governments, which approve construction, intervene in housing price decisions. They also said that even though the prices are high, it is profitable not to constructors, but to the companies that manage the whole construction and sale process.

The NTS officially said the probe is just part of its routine inspections, dismissing the construction industry’s suspicions.

Vice Minister Park Byeong-won of the Ministry of Finance and Economy said in a press conference on the same day, “It has been a long time since the government stopped using tax investigations. The recent inspection does not have anything to do with the real estate policy.”

Insiders of the NTS, however, say, “We recently received calls about high apartment prices. So, we are conducting probes or secret investigations into builders or managing companies that are highly likely to have evaded taxes.”

That means other major builders are expected to be targets of tax probes.