Chairman's Granddaughter Misuses Study Abroad Funds
Scholarships Granted Only to Employees' Children of Affiliated Companies
National Tax Service to Monitor Noncompliant Public Interest Corporation for Next 3 Years
The National Tax Service (NTS) has decided to conduct a thorough investigation of 39 public interest corporations. The NTS has detected suspicions that these public interest corporations purchased expensive golf memberships with donations for private use or spent funds on the overseas education expenses of the chairman's granddaughter.
On the 23rd, the NTS announced that it will carry out detailed inspections of 39 public interest corporations suspected of misconduct such as private use, accounting fraud, and unfair internal transactions.
Choi Jae-bong, Director of the Corporate Taxation Bureau at the NTS, stated, "Misuse of donations seriously undermines trust in public interest corporations, reduces the willingness to donate, acts as an obstacle to fostering a culture of giving, and restricts the social contribution activities of the majority of public interest corporations. Therefore, systematic and meticulous management is necessary. Until now, we have focused on supporting public interest corporations to faithfully fulfill their tax obligations, but the results of the first half of the year’s inspections show that cases of donation misuse still persist."
The NTS conducted individual inspections in the first half of this year and uncovered numerous cases of improper outflow of public interest corporation funds and violations of disclosure obligations among 77 corporations. The amount involved in violations reached 47.3 billion KRW, with estimated tax amounts of 2.6 billion KRW. Based on these inspection results, the NTS plans to identify inspection types suited to the characteristics of public interest corporations and select insincere corporations for detailed verification.
The main inspection categories targeted by the NTS include seven types: ▲unfair internal transactions ▲accounting fraud ▲use for non-public purposes ▲providing benefits to specific groups ▲private use of public funds ▲false labor costs ▲and other obligation violations.
Purchased Golf Club Memberships with Donations, Used Only by Chairman
According to the NTS, Public Interest Corporation I purchased multiple expensive golf memberships with donations and reported to the competent authority that they were for "employee welfare," but in reality, specific individuals such as the chairman used them, indicating private use outside of public purpose projects. This corporation also faces allegations of negligent disclosure for failing to publish financial statements on the Hometax system every April for assets acquired with donations.
There are also cases where public interest corporation funds were used to pay tuition and living expenses for family members living abroad, and false labor costs were paid to the chairman’s family members who did not actually work. Public Interest Corporation J is suspected of improperly spending public interest corporation funds on the overseas school tuition of the chairman’s granddaughter living abroad and supporting the chairman’s children living overseas with domestic living expenses and airfare using the corporation’s credit card. Additionally, the chairman’s children, who mostly lived abroad during their employment period, and a spouse who was elderly and practically unable to work, were disguised as employees (or daily workers) and falsely paid salaries.
Public Interest Corporation A is suspected of leasing a donated sports facility at a significantly low price to a corporation owned by the chairman’s children, increasing the profits of the children’s corporation and providing benefits to the children through dividends, while improperly reducing the rental income reported by the public interest corporation. Furthermore, Corporation A excessively paid management fees to a corporation invested in by the chairman’s family. The NTS believes the chairman’s family received high salaries and led a luxurious lifestyle using luxury foreign cars, golf courses, and hotels.
In addition, the NTS plans to investigate allegations that public interest corporation funds were used to build private facilities for the founding family for free use, or that the chairman continued to use the corporate card to purchase jewelry, expensive hanbok, gift certificates, and other items for private purposes even after stepping down from the position. They will also examine allegations that scholarship foundations only awarded scholarships to children of employees of affiliated companies of the donors.
Director Choi said, "To strengthen the transparency of public interest corporations, we will enhance support for reporting and strictly respond to violations of tax laws such as private use of donations or illegal outflow of public interest corporation funds. We will continue individual inspections of insincere public interest corporations and thoroughly manage them by including those found to have accounting fraud or private use in a three-year post-management program to prevent recurrence of similar cases."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
