Customs to crack down on 'direct buy' tax evasion

By Choi Kyong-ae

The customs office will crack down on attempted tax evasion by people and businesses that make conspicuously large purchases from overseas outlets, while the tax office will not audit many small- and medium-sized firms.

The move comes as an increasing number of people buy directly from overseas wholesale and retail shops in order to save money. Some individuals or companies buy products in large volumes to sell them at a profit on the domestic market, the Korea Customs Service (KCS) said in a statement.

“We are checking whether the reported recipient’s address is the same as the real address to which ordered products are delivered. If the products are delivered to a different address, it is illegal,” Kwon Tae-hue, deputy director of the KCS’ Passenger and Simplified Clearance Division, told The Korea Times.

Customers can make a direct purchase of an item worth up to 150,000 won ($142) from countries other than the United States without paying taxes.

The upper price limit for the U.S. is higher at 200,000 won as the country asked for this to boost its exports when it signed a free-trade agreement with Korea that took effect on March 15 2012, Kwon said.

Selling a directly purchased item is illegal, he explained. “Direct purchases should only be for the consumption of the purchasers.”

So the customs office has come up with preemptive measures to tackle all possible means of tax-evasion through such purchases.

“We will make a thorough analysis on the overall delivery information of directly-purchased items and strengthen our screening process,” said the official.

In early 2016, the customs office plans to complete an express cargo logistics center at Incheon International Airport to intensively screen and check incoming cargo.

Overseas direct buying more than doubled to 11.16 million cases worth $1 billion last year from 5.6 million valued at $472 million in 2011. In the January-August period, the value of direct buying already marked $954 million, according to KCS data.

With the won strengthening against the dollar and decreasing imports squeezing the tax authorities’ revenue income, “there should be all-out efforts to collect taxes by cracking down on illegal acts,” KCS Commissioner Kim Nak-hoe said in a statement.

Meanwhile, the National Tax Service (NTS) has outlined measures to not only help the government’s economic stimulus programs but also boost its tax income.

The NTS said on Monday that it won’t conduct audits into 1.3 million companies until next year, a move taken to help the government’s plan to boost the economy.

The move is the first major step taken by NTS Commissioner Lim Hwan-soo in tax policies after he took office in August.

“Economic recovery is essential for the NTS to achieve its tax revenue target,” Deputy Commissioner Kim Bong-rae said at a press briefing. “As the approach will help the subjected companies focus on their own businesses through 2015, their concentration on business will help buoy sluggish domestic demand.”

The NTS won’t investigate 1.32 million small-and medium-sized companies that will have earned less than 100 billion won each per annum by December next year, the tax agency said in a statement. They account for 25 percent of the country’s 5.08 million companies and individuals who pay income tax on a regular basis.

There are four categories that can benefit from the NTS plan.

The first are businesses which are vulnerable to economic volatility such as restaurants, hotels and travel agencies. Second are industries hit hard by the 2008 financial crisis such as construction, shipbuilding and shipping companies.

The third are new-growth businesses such as fuel-efficient automobiles, next-generation telecommunication services and cultural content providers. And lastly are companies that continue to generate jobs despite the slowing economy.

“As long as the subjected companies honestly report their income, they won’t go through a review process during the given period,” said the deputy commissioner.

The NTS aims to collect 216.5 trillion won in tax revenue for the year. In the January-July period, it achieved 57 percent of this target. Last year, it collected 201.9 trillion won.