138 Tax Evasion Suspects Involved in Mask Hoarding and 'Cheating·Privilege' Under Tax Investigation

Concurrent Investigation of Fund Sources for the Individual and Related Parties Including Family
Continuous Response to Unfair Tax Evasion Acts Beyond One-Time Incidents

[Asia Economy Reporter Kwangho Lee] #Pharmaceutical product wholesaler Mr. A recently hoarded 2.3 million masks costing 1 billion KRW (400 KRW each) through a disguised company under his family’s name following the COVID-19 outbreak. Mr. A used a nominee account to sell masks priced at 700 KRW each for 1,300 KRW each on a cash basis. He is under tax investigation by the National Tax Service (NTS) for allegedly making an illicit profit of about 1.3 billion KRW through undocumented transactions using nominee accounts.

#Pharmaceutical product retailer Mr. B, suspected of falsely accounting labor costs, recently hoarded 830,000 high-end masks worth about 1 billion KRW (1,200 KRW each) in cash. Mr. B sold all the hoarded masks at a high price of 3,000 KRW each, causing a sharp increase in income, and was selected for tax investigation by the NTS on suspicion of receiving false tax invoices worth about 1.5 billion KRW to claim fabricated expenses to reduce taxes.

The NTS has launched tax investigations into 138 suspects of unfair tax evasion, including those benefiting from preferential treatment of former officials, high-priced entrance exams, infringement on people’s livelihood, and operator hospitals.

This investigation also includes 11 pharmaceutical product distributors and sellers who disrupted market order by hoarding masks and other items with sharply increased demand due to the recent COVID-19 outbreak and evaded taxes.

The NTS plans to expand the investigation through tracking at each distribution stage by additionally selecting related parties such as upstream and downstream clients of pharmaceutical product distributors confirmed to have disrupted the market, and will pursue taxation to the end.

Im Kwanghyun, Director of the NTS Investigation Bureau, emphasized, “When illegal acts such as mask hoarding are detected, we will notify related agencies to impose fines and penalties and strictly take measures to thoroughly recover profits gained from antisocial tax evasion by investigation targets.”

If mask distributors make illicit profits and evade income tax, they may be subject to up to 42% income tax, 10% value-added tax, additional taxes, as well as tax evasion penalties amounting to 0.5 times the evaded tax, and hoarding fines up to 60 million KRW, resulting in most of the illicit profits being recovered by the government.

The NTS will also conduct tax investigations into suspects of unfair tax evasion related to preferential treatment of former officials, high-priced entrance exams, infringement on people’s livelihood, and operator hospitals.

Among the suspects caught this time are 28 former high-ranking officials who, after retirement, earn high incomes while evading rightful tax burdens, including lawyers, tax accountants, certified public accountants, patent attorneys, and customs brokers benefiting from preferential treatment.

Also targeted are 35 entrance exam consulting firms, high-priced private academies, star instructors, and arts and physical education academy operators who evade taxes while promoting educational inequality based on parents’ wealth through high tuition fees.

Thirty suspects infringing on people’s livelihood, such as illegal lenders, are also within the scope. Additionally, 34 suspects of tax evasion through illicit methods, including operator hospitals illegally receiving health insurance benefits by borrowing doctors’ names, and monopolistic local licensing business operators, have been selected.

However, businesses eligible for COVID-19 tax relief announced on the 5th are not included in this investigation.

Director Im stated, “We will continue to strongly respond not only once but persistently to unfair tax evasion through privilege and unfair practices such as preferential treatment of former officials, high-priced entrance exams, and mask hoarding.”