Audit finds that Incheon Regional Tax Office mishandled more than $37 million in taxes
The Board of Audit and Inspection of Korea uncovered 30 cases of unlawful or improper practices involving 52.1 billion won ($37.6 million) in taxes, for which authorities then had to collect an additional 50 billion won and refund 2.1 billion won.
A sign for the Board of Audit and Inspection of Korea building in Jongno District, central Seoul
NEWS1
Incheon’s tax office undercollected or overcharged tens of billions of won in taxes following inadequate reviews and poor oversight, exposing broad weaknesses in its tax administration, an audit found.
The Board of Audit and Inspection of Korea released on Tuesday the results of a regular audit of the National Tax Service’s Incheon Regional Tax Office — the first such audit since the office opened in 2019. The board uncovered 30 cases of unlawful or improper practices involving 52.1 billion won ($37.6 million) in taxes, for which authorities then had to collect an additional 50 billion won and refund 2.1 billion won.
According to the audit, the Incheon Regional Tax Office identified signs that controlling shareholders of a ready-mix concrete manufacturer and seller had understated the company’s real estate holdings — done to qualify for a flat 25 percent tax rate instead of a progressive rate of up to 45 percent — but failed to act on the finding. As a result, 24.9 billion won in capital gains tax went uncollected.
The Incheon Regional Tax Office also failed to look into potential gift tax liabilities even after finding signs that individuals had improperly received 25 billion won in interest-free loans from a company owned by a parent or from buying shares in relatives’ companies at more than five times market value. As a result, 25 controlling shareholders of 17 companies avoided 4.5 billion won in gift taxes.
Separately, other offices under its jurisdiction, including the Bupyeong Tax Office, improperly refunded 1.07 billion won in corporate taxes after failing to check relevant rules.
The audit also uncovered cases in which tax authorities overcharged taxpayers.
In one case, the Incheon Regional Tax Office arbitrarily applied an appraised value that had no legal basis when assessing inheritance tax on unlisted shares, inflating the company’s real estate ratio. The error caused an heir to pay an additional 690 million won in inheritance tax.
Authorities also found that offices outside of Incheon, including the Paju Tax Office, received tips that local businesses had exchanged fictitious tax invoices but left the cases unattended for years. By the time they began investigations, the seven-year statute of limitations had expired, making it impossible to impose administrative penalties worth 1.35 billion won.
The Board of Audit and Inspection of Korea issued 11 warnings and 19 notices to the Incheon Regional Office and ordered it to collect the omitted taxes, strengthen its tax-source management and draw up measures to prevent similar problems.
BY KO SEUNG-PYO [[email protected]]
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
