KB to Sue Tax Authorities Over Corporate Tax

By Kim Jae-won

Staff Reporter

Kookmin Bank will file a lawsuit against the nation's tax agency due to a corporate tax of more than 400 billion won, the lender said Tuesday.

The nation's largest bank said the taxation was unfair, while the National Tax Service (NTS) said the lender has tried to avoid corporate tax expanding loan-loss provisions too much.

KB said they are preparing to take legal action against the NTS to get a tax refund of 442 billion won, which the bank paid in August 2007.

"We mull suing the NTS over the taxation. We are being counseled by law firms, and they suggested filing a lawsuit against the tax agency," an employee of KB said on the condition of anonymity. "Lawyers said we are likely to beat the NTS at the trial. We will appoint a law firm as our legal representative, and will complete the filing process by mid-June."

The NTS levied KB an additional corporate tax of 442 billion won in 2007 saying the lender tried to reduce tax while they merged with KB Card, the lender's subsidiary in 2003.

KB paid the tax in August 2007, and filed a complaint at the Tax Tribunal, but the tax adjustment agency declined KB's appeal last month.

The Tax Tribunal said it is clear that KB tried to avoid paying the corporate tax.

"KB should have used the lender's loan-loss provisions to cover debts of KB Card at the time. However, the lender demolished those provisions before merging with the card subsidiary, and set new loan-loss provisions so they could be accounted as an expense to avoid possible taxation of income," an official of the tribunal agency said on the condition of anonymity. "It is apparent that KB tried to avoid taxation. It is a kind of sneaky tactic."

However, KB said it is fine to set aside those loan-loss provisions after the merger.

"There was no problem. We merged with KB Card, so it is part of Kookmin Bank. There is no legal issue concerning that," Jang Bae-joo, a senior director in KB's accounting division, said.