Auditor General “violated taxpayer rights” by applying tax evasion charges to overseas professional baseball players

Auditor of Jongno-gu, Seoul.

The National Tax Service violated taxpayers’ rights and interests by conducting a tax investigation on a professional

baseball player living abroad under a long-term contract with an overseas team on suspicion of tax evasion, according to the National Audit Office.

The National Audit Office

Released an audit report on the status of taxpayer rights protection on Wednesday, showing cases in which the NTA

selected taxpayers for investigation without specific suspicions or evidence of tax evasion.

According to the audit, the Seoul Regional Tax Office conducted a tax investigation in March 2019 on suspicion that Mr. A,

a professional baseball player, failed to file a comprehensive income tax return on the 8.3 billion won ($8.3 million) in

contracts and salaries he received while playing for a Japanese professional baseball team from 2014 to 2015.

At the time, the Seoul Regional Tax Office selected Mr. A as a tax investigation target because he had an address in Korea,

was enrolled in the national pension system, and filed a comprehensive income tax return while playing in the U.S. Major League Baseball from 2016 to 2017.

However, the tax investigation was terminated when the Advisory Committee on Taxation Practices ruled that Mr. A was a

non-resident of Korea due to his long-term stay in Japan and was not taxable.

The NTA

Believed that the tax investigation was unreasonably conducted and infringed on the rights and interests of the taxpayer,

given that Mr. A’s stay in Japan averaged 281 days per year after signing the two-year contract, most of his income was

generated in Japan, and he had no property in Korea other than a car, so he had a closer economic relationship with Japan.

The audit also found that the Daegu Regional Tax Office simply estimated Mr. B’s cash sales ratio at 19% and applied it to

the past three years in a batch, based on the fact that only 42 credit card payments were made out of 52 customers who

visited the office during three field visits and six hours. The auditor’s conclusion was that the tax investigation was

conducted without a reasonable basis and did not produce any results.

In addition, the audit found nine cases in which businesses whose liquor manufacturing licenses were revoked due to

missing sales or violation of the obligation to pay tax invoices re-acquired liquor manufacturing licenses by establishing a

new corporation under the name of a family member such as a spouse or a controlling shareholder during the restriction period.

“Despite the revocation of the liquor manufacturing license, the business continues to operate in a circumventive manner,

which greatly reduces the effectiveness of the system for restricting the re-acquisition of liquor manufacturing licenses,”

the audit agency said, adding that “standards need to be revised.”

In the case of Takju’s liquor license revocation threshold (500,000 won),

The audit agency pointed out that the threshold should be raised because it does not reflect the size of the national

economy, the growth of the liquor market, and the inflation rate.

In addition, the National Audit Office demanded disciplinary action against the head of the Daejeon Regional Tax Office’s B

Division, saying that in the tax investigation of the Chungnam Development Corporation, 40.5 billion won in corporate

taxes from 2012 to 2013 could have been collected if corporate taxes were assessed without expanding the scope of the

investigation and the attribution period was changed through a correction claim, but only corporate taxes from 2014 to

2018 were refunded, resulting in a loss to the national treasury. 19가이드03

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