KB sues NTS for W400 bil. tax refunds

By Kim Jae-won

Staff reporter

Kookmin Bank has filed a lawsuit against the nation’s tax agency recently due to “unfairly” levied corporate tax of more than 400 billion won, the lender said Wednesday.

The nation’s largest bank said the taxation was unjust, while the National Tax Service (NTS) said the lender has tried to avoid corporate tax by overly expanding its loan-loss provisions.

KB said they took legal action against the Jungbu District Tax Office in downtown Seoul to get a tax refund of 442 billion won. The bank paid the tax in its entirety in August 2007.

“We filed the complaint on Tuesday. We are being counseled by law firms, and they suggested filing a lawsuit against the tax agency,” a KB representative said on condition of anonymity. The lawsuit was filed at the Seoul Central District Court.

“The lawyers said we are likely to beat the NTS. We appointed a local law firm as our legal representative, and completed the filing process recently.”

KB said that they will probably appoint Kim & Chang as their legal advocate.

“We usually have hired lawyers from Kim & Chang. This time may be the same,” the employee said.

The NTS levied KB an additional corporate tax of 442 billion won in 2007, saying the lender had tried to lower taxes they were required to pay, while they merged with KB Card, the lender’s subsidiary in 2003.

NTS said there was no problem with levying corporate tax on the lender, and was also sure that it would win the case.

“We impose taxes according to the law. We are preparing the case diligently,” Hong Seong-no, director of the Seoul Regional Tax Office, who is in charge of legal issues at the Jungbu office, said.

KB paid the tax and filed a complaint at the Tax Tribunal, but the tax adjustment agency declined KB’s appeal in March.

The tribunal, which dealt with the case, said it was clear that KB was trying to avoid paying corporate tax.

“KB should have used the lender’s existing loan-loss provisions to cover debts of KB Card at the time,” an official of the tribunal agency said on the condition of anonymity.

“However, the lender set new loan-loss provisions for the merger so they could be counted as an expense to avoid taxation.”

KB said it was not against the law 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.