The National Tax Service mishandled parts of its corporate tax-compliance scoring by omitting certain evaluation items for thousands of companies, leading to 120 corporations being wrongly selected for tax audits in 2024 and 2025, the Board of Audit and Inspection said on the 27th.
The audit board said a regular audit of the NTS conducted in May and June last year found 23 issues, including 11 cases requiring caution and 12 notifications.
According to the findings, 30 corporations in 2024 and 90 in 2025 were improperly chosen for audits on suspicion of inaccurate filings.
In assessing corporate compliance ratings used as a key audit-selection standard, the NTS failed to apply base scores of 18 to 32 points for some items and instead treated them as zero, making those companies appear less compliant than others, the audit board said.
The audit board said similar problems occurred in selecting audit targets among individual business owners. Regional tax offices are supposed to choose actual audit targets in order of higher suspected evasion after receiving a list from NTS headquarters, but in 59 cases they selected targets arbitrarily, such as by simply following the order of names on the list.
It also said five people who should have been audited were improperly excluded because checks on name matches and audit history were inadequate.
The audit board also notified the NTS to prepare improvements, saying its “tax filing compliance evaluation system” was broadly unreasonably designed, including items unrelated to compliance.
Auditors also found 22 cases in which assets were transferred within families in what appeared to be disguised gifts, but the NTS failed to filter them out and recognized them as sales transactions.
Under the rules, if a recipient does not properly pay for transferred assets, the transaction should be presumed a gift and taxed accordingly. The audit board said the NTS did not properly collect additional taxes in deals that effectively looked like gifts, such as taking only a 10% down payment and treating the remainder as an interest-free loan.
The audit board said it confirmed 22 cases, totaling 81.7 billion won, that lacked “customary and economic rationality” and raised doubts about their authenticity despite being accepted as sales. It said a re-examination is needed on whether to presume gifts to curb irregular transfers disguised as sales.
The audit board also said the NTS took no action after receiving a list of people who improperly obtained value-added tax exemptions by lending their names to medical businesses, including so-called “paper-owner” hospitals. It warned that 31 billion won could go uncollected and that the NTS had already missed the assessment deadline for 26.7 billion won.
* This article has been translated by AI.
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