Court Rules No Reward for Tax Evasion Tips Without Concrete Evidence

A court has ruled that individuals are not eligible for a reward for reporting tax evasion if they fail to provide concrete evidence to verify the alleged tax evasion.

The Seoul Administrative Court, Sixth Administrative Division (Presiding Judge Na Jin-i), ruled against the plaintiff in May in a lawsuit filed by an individual identified as A against the head of the Guro District Tax Office, seeking to cancel the decision to deny a reward.

In May 2023, A reported to tax authorities that a foundation, B, had evaded taxes after constructing a building, and subsequently applied for a reward. A filed the lawsuit after the request was denied.

The tip alleged that Foundation B had received an improper refund of 8 billion won in value-added tax (VAT) on construction costs by claiming to be a non-profit organization, despite operating a for-profit business by leasing all 150 units of an officetel created through building extensions and remodeling.

The court ruled in favor of the tax authorities.

The Framework Act on National Taxes stipulates that rewards may be paid to those who provide significant information used to calculate the amount of tax evaded or improperly refunded or deducted by a taxpayer.

The court pointed out that the main content of A's tip did not align with the actual grounds for the tax authorities' assessment.

The tax authorities' assessment was based on the fact that Foundation B had received a VAT refund under the pretext of building an office-use officetel, but actually used it for residential leasing. This differed from A's tip, which questioned the legal status of the foundation.

The court stated, "It is difficult to see that it has been proven that the information could verify the facts of tax evasion or that it was directly related to or significantly contributed to calculating the foundation's evaded tax amount." The court added, "The decision in this case, which determined that the tax evasion tip did not constitute 'significant information,' is lawful."

The court further judged, "We cannot find any specific facts that could serve as a lead for the assessment, or information that could identify the location of materials containing such facts," adding, "It appears that it would have been difficult for the defendant to easily verify the facts of tax evasion based on this."

(Photo: Yonhap News)
※ Please note: This article was translated by AI and may contain errors.