▲ Chairman Kwak Hyuk of Seido Group
Kwak Hyuk, chairman of Seido Group and South Korea's top individual tax delinquent, has decided to pay in full his personal tax arrears amounting to nearly KRW 400 billion.
He has already paid KRW 100 billion in cash.
The National Tax Service (NTS) announced today (Oct. 7) that, following tracking by a special task force (TF) on high-value delinquencies, Chairman Kwak submitted a payment plan to fully settle his personal tax arrears of KRW 393.8 billion.
The arrears accumulated over some 15 years since a comprehensive income tax notice was issued in 2011. Kwak first paid KRW 100 billion in cash last July.
This broke the previous record for a single cash tax payment.
He has submitted a payment plan for the remainder.
As Chairman Kwak has no domestic assets registered under his name, he offered five overseas-located ships as collateral.
The NTS explained that the value of these vessels exceeds the remaining tax arrears.
A process to evaluate the adequacy of this collateral is currently underway.
The NTS added that because this is the first case of offering overseas ships as collateral, it is also receiving prior consulting from the Board of Audit and Inspection.
The total tax arrears on the books stand at KRW 790.2 billion, which includes Kwak's personal arrears as well as the designated delinquent amounts of related corporations that bear secondary tax liability for these arrears.
Once Kwak pays the entire KRW 393.8 billion, the tax arrears subject to secondary tax liability imposed on the corporations will also be completely extinguished, clearing all tax arrears on the books.
During a briefing today, NTS Commissioner Lim Kwang-hyun emphasized, "This is the first time in the history of the National Tax Service that such a massive amount of delinquent tax has been paid. If it is paid according to plan or if the collateral is forcibly collected, about KRW 800 billion in tax arrears will be extinguished."
Kwak had previously argued that he had no taxes to pay because he was not a South Korean resident, but this time he expressed his intention to pay in full.
Observers speculate that Kwak, who ranked first in individual tax delinquency, changed his mind because he felt burdened by the NTS's all-out pressure.
Launched in January of this year, the special TF on high-value delinquencies has concentrated its efforts on tracking and collecting Kwak's overseas concealed assets.
The TF expanded its global information-sharing network.
It dispatched delegations to countries with significance in understanding overseas holding structures and held emergency information meetings to raise awareness of the issue among foreign tax authorities.
It actively held top-level commissioner meetings with key countries and signed practical agreements (MOUs) on collection cooperation and information exchange.
Through this, the NTS evaluated that it has opened doors to gather effective information during overseas visits and non-face-to-face video conferences by working-level staff.
Commissioner Lim explained, "While inviting the heads of the tax authorities of Liberia and Panama, which are flags of convenience countries (nations where ships are registered for international operational advantages), there were many conversations and progress. We also had extensive talks with the head of the UK tax authority, and information exchange is still taking place smoothly."
From the perspective of Kwak, who has no assets under his name in South Korea subject to forced collection, the NTS presumes that he felt pressured as the agency began to earnestly turn its eyes toward overseas assets and strengthen cooperation with tax authorities in those countries.
In particular, it appears that the decisive blow was struck last June when Investigation Bureau 4 of the Seoul Regional Office of the National Tax Service, often called the "grim reaper of the business community," launched an irregular (special) tax audit against Seido Shifang's South Korean branch, a company practically managed by Kwak.
He paid KRW 100 billion a month after this investigation.
Ryu Choong-sun, Director General for International Taxation, said, "Chairman Kwak expressed his intention to contribute to the economy by becoming South Korea's Jang Bogo through his shipping business. It seems he judged that it is considerably difficult to run a business in the current risky situation."
To institutionalize these achievements, the NTS is materializing plans to establish for the first time a regularized "Tax Audit-Arrears Tracking Linked Special Investigation Team" within irregular investigation bureaus of regional offices nationwide, including Seoul Regional Office Bureau 4.
In addition to investigating tax evasion offenses, the special investigation team plans to conduct irregular (special) audits on delinquents suspected of tax evasion, such as capital outflows.
To assign top talent to the special investigation team, staff equipped with capabilities in irregular penal tax audits, audits of controlling shareholders' assets, legal reviews of seized items, and overseas information collection and utilization will be selected between November and December.
Commissioner Lim Kwang-hyun emphasized, "Building upon the TF's experience, we will ensure that short-term collection results lead to mid- to long-term achievements so that delinquents cannot hide assets anywhere in the world. We will track them down regardless of domestic or overseas locations and definitely collect the taxes. Through this, we will do our best to realize tax justice and foster a fair tax administration environment trusted by the people."
(Photo: Yonhap News)
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