ED 'Political' tax audits

In Korea where corporate ethics remain weak, with businesses bent mostly on maximizing profits, the National Tax Service (NTS) should look long and hard at companies’ tax returns.

Nevertheless, the public watch not only corporations but also the NTS’s corporate audits with suspicion.

That’s because tax audits here are often more political than economic events.

There are two major purposes of “political” tax audits — one is for a political vendetta, and the other is for increasing government revenue to the maximum.

In 2009, probably under the orders of the then-President Lee Myung-bak, tax officials searched every hole and corner of Taekwang Corp. and its CEO Park Yon-cha, who was one of the largest political donors to Lee’s predecessor and political opponent, the late President Roh Moo-hyun. The probes exposed Park’s bribery of some of Roh’s family members, leading to the former president’s suicide.

Last year, the government’s tax revenue totaled 242 trillion won ($212 billion), a hefty increase of 11.3 percent from 2015. Given the nation’s economy grew only 2.7 percent and the taxation regime showed no significant changes, the steep rise in tax receipts was due to extensive corporate audits under the Park Geun-hye administration.

It is against this backdrop that Han Seung-hee, the first NTS chief in the Moon Jae-in administration, said last week he would refrain from making politicized tax audits while looking into whether or not those conducted by the previous administrations were justifiable in that regard.

Few can deny the need for establishing tax justice, especially by imposing due taxes on conglomerates’ less-than-transparent accumulation of wealth or irregular transfers of management control. There is a caveat, though: there should be no more tax audits as political retaliation as well as abusing or misusing the tax authority to squeeze taxpayers.

That also explains why President Moon’s tax reforms should aim at establishing fairer, more objective and more transparent principles in taxation and audits.