LG Group investigated over tax evasion allegations

18:12 | 11/05/2018
The Korean authorities’ investigation into tax evasion at the country’s fourth biggest group, LG Group is causing a stir. The corporation promises full cooperation, as it did in Vietnam, when LG Electronics Vietnam Co., Ltd. was caught out by tax authorities.
lg group investigated over tax evasion allegations
LG Group's headquaters in Korea's Seoul capital city. Photo: baotintuc.vn

A huge stir inspection

A scandal related to the heiress of Korean Air Lines Co., Ltd., former Korean Air Lines executive Cho Hyun Min ealier this year has stirred up public anger at the behaviour of the rich and powerful, and sparked investigation into her family and its business.

In the morning of May 9, Korean public prosecutors paid a surprise visit to LG Group’s headquarters to investigate accusations of tax evasion made by employees.

Reuters stated that the public prosecutors are investigating allegations that LG Group has dodged paying $9.25 billion in taxes in a deal related to a subsidiary’s transferring shares, according to the document the Office of Seoul Central District Prosecutors sent to news agencies.

Reacting to these accusations, LG Group’s spokeswoman said that related parties will collaborate with the public prosecutors’ investigation.

Reuters cited her as saying that the tax difference may have arisen out of different views on the amount of tax payable after some shareholders sold their shares and paid the corresponding taxes.

The inspection would be the latest in a string of troubles faced by chaebols, families controlling South Korean conglomerates.

Getting caught by Vietnamese authorities

In late 2016 LG Electronics Vietnam Limited (Haiphong) was fined for VND1.3 billion ($57,268) by the Post Clearance Audit Department (General Department of Customs) for purposefully not declaring their special relationship with foreign partners under the same group (LG Group) on the tax documents of imported goods, according to dantri.com.vn.

On December 5, 2016, the Post Clearance Audit Department issued a document to impose administrative fines for LG Electronics Vietnam Limited.

“The decision to impose administrative fines for “not declaring special relationship” is unjustified because this does not change the amount of tax payable,” stated LG Electronics Vietnam’s document.

In a document sent to the Ministry of Finance (MoF) on December 15, 2016, LG Electronics Vietnam claimed that the tax amount charged after imposing the administrative fine for “not declaring its special relationship with partners” was inaccurate.

In addition, the firm asserted that the payable tax increased as the customs office used a higher tariff rate that was imposed after the actual imports took place.

Previously on October 28, 2016, LG Electronics Vietnam was also called on by the General Department of Customs to pay tax arrears of VND6.8 billion ($299,559).

The reason behind this decision was that LG Electronics Vietnam had incorrectly declared the Harmonised Commodity Description and Coding System (HS code) and had not added the insurance premium to the taxable value.

Afterwards, despite LG Electronics Vietnam's paying $299,559 of the total fine for shortcomigs in the e-customs declaration, and selecting incorrect codes for buyers and sellers who have special relationships within the group, the company maintained its claim that the $57,268 fine from the General Department of Customs was not reasonable or justified and decline to pay the rest.

By Van Anh

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