By Kim Sung-jin
Staff Reporter


The government is under fire for using tax audits against leading corporations to offset sagging tax revenue.

According to the National Tax Service (NTS), the agency is carrying out tax audits on leading domestic corporations in the manufacturing and service industries. The NTS said that the shortfall in tax revenues from a 2 percent reduction in corporate tax amounts to 800 billion won this year and is expected to reach 2.8 trillion won next year.

Big companies are targeted. They include SK Corp., POSCO, Hyundai Motor, Hyundai Elevator, Hanwha Engineering and Construction, Crown Confectionery and Shinhan Bank.

The NTS, however, said the tax audits are regular ones that are coming every five years.

Nevertheless, the NTS is under suspicion that it has selectively launched tax audits into lucrative large-sized firms to offset the growing tax revenue loss from prolonged domestic economic doldrums, squeezing out more taxes from corporations.

Skeptics say that the tax authority began investigations, weighed down by the pressure from the Ministry of Finance and Economy (MOFE) to replenish the dropping tax revenue.

In addition, the MOFE and the NTS are reviewing a plan to slash earned income tax credit (EITC) benefits for individuals as part of efforts to increase tax revenue.

They want to cut the credit rating of the EITC from 20 to 15 percent sometime next year. EITC refers to the refundable tax credit that offsets taxes paid by low-income salary workers as a form of incentive to laborers.

The agency said the money the government had to pay out through the EITC program amounted to 830.8 billion won last year, as much as 24 times the 34.6 billion won returned to taxpayers in 2001. Critics say the sharp spike in government expenditures is largely attributable to the government’s hasty implementation of economic policies.

sjkim@koreatimes.co.kr