Samsung Electronics, National Tax Service Kept Tax Audit Secret for 20 Days

Samsung Electronics, National Tax Service Kept Tax Audit Secret for 20 Days. July. 27, 2007 03:11. bookum90@donga.com koh@donga.com.

The Samsung Electronics, which has been under a National Tax Service audit since early this July, has kept its tax audit a top secret. As even a few numbers of related high-ranking officials knew about this tax audit in the company, many officials did not know about the audit. The NTS reportedly asked them to keep the matter confidential.

However, as the fact about a periodic tax audit, which the company had not received for 11 years, was reported exclusively by Dong-A Ilbo, Samsung seemed embarrassed and tried not to let the matter be interpreted broadly. A high-ranking Samsung official stressed that, “This is a periodic tax audit, not a special one, and there is no reason that we are under a tax audit.”

Samsung Electronics has been appraised as a reliable company when it comes to paying taxes. Samsung has paid taxes worth over one trillion won every year since 2003.

As for properly paying taxes, it received the Gold Tower Order of Industrial Service Merit on a taxpayers day in 2002 and 2004, and it also received the Gold Tower Order of 1.3 trillion won for national taxes in March this year.

Regarding the fact that the company kept a secret about the tax audits, a Samsung high ranking official analyzed that Samsung, as a reliable taxpaying company, might judge the time when they received the tax audit, which could put pressure on the Samsung Group. The official said, “As Samsung Electronics’ second quarter performance this year was the worst ever in five and a half years and the nation is focusing on a presidential election, rumors are all around.”

There are concerns that the business community considers periodic tax audits as political inspections. In fact, the price of Samsung Electronics stock fell by 3.4% on July 26 compared to the prior day, which saw the price affected by the tax audit.

The NTS has reportedly been worried about taming business concerns prior to the upcoming presidential election. Especially as Chief of the NTS, Jeon Gun-pyo officially asked for a close tax inspection of corporations’ secret funds by saying on July 17, “Prior to the presidential election, problems of illegal political capital can happen.” The NTS would feel the bulk of the burden for exposing it as a result of the tax audit of Samsung Electronics.

Accordingly, the National Tax Service and Samsung Electronics have kept the tax audits classified as even some high-ranking officials said they knew about the tax audits after reading the Dong-A Ilbo.

A Samsung Electronics official said, “Even our financial and accounting divisions have shown signs of foreknowledge; later on we found out that the NTS was auditing quietly by calling in one or two related officials and questioning them and asking for documents they needed for the tax audits.”

The whole Korean businesses sector is focused on the results of the number one corporation, Samsung Electronics, and the result of the tax audits. A related official in the business said, “If a good student gets punishment, what kinds of feelings will other students have?”

The tax audits have reportedly been run by 80 inspectors from the Jungbu Regional National Tax Service, which has jurisdiction over Suwon, where Samsung Electronics headquarters is located.