Firms used fake tax invoices and fabricated costs to evade taxes
The National Tax Service said Thursday it has launched tax audits of 10 companies suspected of evading taxes while bidding on government wildfire recovery projects.
The companies are accused of mobilizing 41 shell firms over the past six years — including during last year's North Gyeongsang Province wildfires — to win public contracts, using fake tax invoices and fabricated cost entries to evade a combined 70 billion won ($51.1 million).
During the investigation period, the companies used shell firms to submit roughly 6,500 so-called "locust bids" — a term for repeatedly bidding across different regions — on wildfire recovery contracts, winning about 260 of them worth a combined 23 billion won.
To circumvent regional bidding restrictions designed to protect local small businesses, the firms repeatedly relocated their registered business addresses.
The NTS said the alleged evasion amount exceeds the total contract value because a single transaction involving fake tax invoices exchanged among shell firms can be counted as a violation by multiple companies simultaneously.
One operator, identified only as A, ran a forestry business centered in North Gyeongsang Province and deployed six shell firms, frequently moving registered offices to South Chungcheong, North Chungcheong and North Jeolla provinces. The operator submitted about 300 locust bids for wildfire recovery contracts and won more than 20 of them.
To meet project performance requirements, A generated fake tax invoice transactions worth hundreds of millions of won among the six firms.
A is also suspected of funneling about 1 billion won in corporate funds as salaries to nominal representatives — including a spouse who did not actually work — and of inflating payroll records for daily laborers to fabricate an additional 1 billion won in costs.
Rather than hiring a certified forest management technician as required for forestry work, A is suspected of routing hundreds of millions of won in license rental fees through salary payments.
A second operator, identified as B, ran a forestry business in Gangwon Province and similarly used six shell firms to place more than 200 locust bids, winning 20 contracts.
That company was also found to have exchanged fake tax invoices worth 2 billion won among shell firms and fabricated 3 billion won in costs using daily laborers.
Investigators also found that B used corporate credit cards to purchase luxury watches and spent hundreds of millions of won on personal expenses, while a spouse with no apparent income acquired real estate worth more than 2 billion won.
The NTS began scrutinizing what it calls a "wildfire cartel" in May, extracting data on 5,331 companies that had participated in wildfire recovery project bids from Public Procurement Service records. It then closely analyzed transaction histories of 138 firms that had won contracts totaling 1 billion won or more before selecting the 10 companies for audit.
"Fraudulent bidding through shell companies can only be eradicated by ensuring that those involved cannot profit economically — through rigorous tax verification separate from any criminal or administrative sanctions," NTS Investigation Bureau Director Lee Seong-geul said. "We also conducted intensive checks on small firms that had fallen into blind spots in tax oversight."
Lee added that the agency would "use every available means to conduct a thorough investigation" and would examine the sources of wealth of company owners and their families suspected of accumulating assets through irregular means. "Anyone who meets the requirements under the tax crime punishment law will be prosecuted without exception," he said.
oskymoon@heraldcorp.com
