Luxury businesses under tax probe

By Kim Jae-won

The tax agency launched special tax audits Tuesday against 40 luxury business owners and medical doctors suspected of evading income tax by receiving fees in cash and running illegal schemes.

The National Tax Service (NTS) said it has started to probe high-end skin care shops, dermatologists, hair salons and bars among others which allegedly underreport their income. According to the tax authorities, some owners hide the unreported income in cash at their homes, while others put the money in bank accounts under false names to dodge taxes.

The agency said that the audits are part of efforts to crack down on high earning self-employed people. The NTS has looked into 150 businesses since 2010, and levied 100.2 billion won ($87.7 million) in back taxes and fines.

“We’ve found that some business owners who neglected their duties to pay taxes while enjoying luxurious lives with their hidden income. We will trace them and continue to audit them thoroughly by law and principle,” said Kim Hyeong-hwan, a director of the NTS, in a press briefing.

The NTS uncovered tax evasion by luxury business owners and medical doctors last year. A renowned plastic surgeon, whom the tax agency declined to identify, underreported 11.4 billion won in income by taking medical fees in cash.

He put the money in a hidden safe to try and avoid detection in the case of a raid by tax authorities. The NTS charged him 6.9 billion won in back taxes, and accused him of violating tax laws.

Another medical doctor specializing in treating female patients underreported 4.5 billion won of income by receiving fees in cash. The NTS investigators found out the doctor hid 2.4 billion won in cash at his home. The tax agency sent him a 1.9 billion won income tax bill, and reported him to the prosecutors’ office under the tax criminals punishment law.

The tax agency imposed new regulations in April 2010, which enforces the self-employed and professionals such as lawyers, accountants, doctors and wedding hall owners, to issue cash receipts to customers when they pay more than 300,000 won for services.

The agency said that there is still resistance against the rule. “We implemented the regulation to crack down on tax evasion but illegal practices are prevalent in business,” said Shin Su-won, an NTS director.