The National Tax Service (NTS) has launched a tax investigation into forestry companies accused of using ghost firms to secure contracts for wildfire recovery work while underreporting income. The contracts awarded to these companies amount to approximately 23 billion won, with the total amount of tax evasion suspected to reach around 70 billion won.
On September 3, the NTS announced it would investigate ten forestry companies identified for engaging in fraudulent activities, including false tax invoice transactions and inflated costs. These companies utilized 41 ghost firms.
The investigation follows a directive from President Lee Jae-myung in May, who highlighted the issue of ghost firms in wildfire recovery projects and called for measures to address structural corruption. The NTS began its verification process immediately after the directive, analyzing procurement data from the past six years to identify 5,331 companies, ultimately selecting 138 firms with contract amounts exceeding 1 billion won for further scrutiny.
During the investigation period, the targeted companies participated in over 6,500 bids for wildfire recovery projects using ghost firms, winning contracts worth approximately 23 billion won in about 260 instances.
Additionally, the investigation revealed a practice known as 'grasshopper bidding,' where companies frequently relocated to evade local bidding restrictions designed to protect small businesses. One company reportedly changed its business location 16 times over five years.
Key methods of tax evasion included inflating performance records through fictitious transactions between ghost firms and distributing income. Companies exchanged tax invoices without actual transactions to meet bidding performance criteria or issued false invoices by misrepresenting the service providers involved.
There are also allegations that some companies did not hire qualified technicians for forestry work but instead borrowed their certifications, treating rental fees as salaries. Instances of falsely categorizing non-existent expenses as 'miscellaneous' or 'other costs' and fabricating income reports were also included in the investigation.
One organization, based in North Gyeongsang Province and operating in South Chungcheong, North Chungcheong, and North Jeolla provinces, mobilized six companies to participate in about 300 bids for recovery work, winning contracts around 20 times. The NTS is investigating claims that this organization funneled approximately 1 billion won in corporate funds to a nominal representative who was not actively employed.
This organization allegedly paid millions of won in salary to forestry technicians for certification rentals and inflated costs by duplicating records of temporary workers' employment locations and durations, resulting in about 1 billion won in fabricated costs.
Another organization, based in Gangwon Province, is under scrutiny for exchanging around 2 billion won in false tax invoices to meet bidding requirements and inflating costs by about 3 billion won.
The owner of this organization has been found to have misused corporate funds for personal purchases, including luxury watches, and his spouse acquired real estate worth approximately 2 billion won without any apparent income, prompting the NTS to investigate the source of these funds.
The NTS plans to examine transaction records and the flow of corporate funds through account inquiries, as well as investigate the financial sources of owners' families suspected of forming assets through illicit gains. If the transactions involving false tax invoices meet the criteria for punishment under tax evasion laws, the NTS will take appropriate action.
* This article has been translated by AI.
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