[Invest&Law] Consecutive Special Tax Audits by Investigation Division 4... Is Corporate Scrutiny Intensifying?

DL, Golfzon, CJ, etc.
‘Kim Jin-woo’ Investigation Division 4 Launches Special Tax Audit in Full Swing

Minjuwon, Director of the Investigation Bureau at the National Tax Service, announced the implementation of a tax investigation into the unfair tax evasion activities of the Sajoo family on the morning of November 27 at the National Tax Service press room in the Government Sejong Complex. The investigation targets a total of 37 companies accused of "using company funds as personal money," "preferentially allocating profitable contracts," and "gaining unfair profits through undisclosed corporate information." Photo by Yonhap News

The Seoul Regional Tax Office's Investigation Division 4, known as the "big corporation grim reaper," is conducting special tax investigations targeting major companies suspected of tax evasion, embezzlement, and breach of trust. The business community is on edge, wondering if "corporate investigations" are now being conducted by the tax office before the prosecution.

On the 20th of last month, Investigation Division 4 conducted tax audits on CJ CheilJedang and the coffee franchise company Mega MGC Coffee. The National Tax Service is reportedly investigating the possibility of collusion between management and the owner family during the process where current and former employees of Mega MGC Coffee collected tens of billions of won in rebates from franchise stores.

Currently, Investigation Division 4 is focusing on fund transactions and tax evasion between the owner family and special-related corporations. The special tax investigation targets include DL Group, Hyosung Heavy Industries, Manna Corporation, The K-Tech, Golfzon Newdin Group, and RF Semi.

Since September, the National Tax Service has uncovered 47 cases of illegal rebates in the construction, medical, and insurance industries and has initiated tax investigations. Investigation Division 4 is expanding the scope of investigations beyond specific companies within groups to include holding companies and other business sectors to verify unfair transactions and tax evasion. In the case of DL Group, the holding company DL Co., Ltd., its major shareholder Daelim, and affiliates DL Chemical and Yeochun NCC have been investigated.

The business community believes that the atmosphere at the National Tax Service changed after Kim Jin-woo was appointed head of Investigation Division 4 in September. Kim, who is not a former civil service exam pass (non-행시) but a graduate of the Tax College (6th class), is the first from this background to be appointed as head of Investigation Division 4. The division has been known as the "National Tax Service's Central Investigation Department," akin to the Supreme Prosecutors' Office Central Investigation Department, specializing in planned tax audits of corporations. With over 19 years of experience in tax investigations, Kim has built expertise through roles such as the National Tax Service's Offshore Information Officer and head of Investigation Division 1. Since his appointment, the industry views the tax authorities' stance on corporate illegal activities such as sophisticated asset concealment and malicious tax evasion as having become much tougher.

On the 27th of last month, the National Tax Service announced it would begin tax investigations targeting 37 domestic companies and their owner families suspected of tax evasion by monopolizing corporate profits through self-serving management and moral hazard. The investigation targets include 14 companies that used corporate funds for personal purchases of high-priced real estate and artworks, 16 companies that unfairly allocated lucrative contracts, and 7 companies that gained unfair profits through undisclosed corporate information such as initial public offerings (IPOs).

The National Tax Service plans to thoroughly verify the owner families' self-serving behaviors and, if tax evasion is confirmed, convert the case into a tax crime investigation under the Tax Offenders Punishment Act and report it to the prosecution.

Woo Bin, Legal News Reporter