What do experts make of singer and actor Cha Eun-woo's "20 billion won tax evasion controversy"?
Recently on the YTN radio channel, host announcer Park Gwi-bin connected by phone with attorney Kim Myung-gyu to hear in detail about Cha Eun-woo's tax evasion allegations.
Earlier, attorney and accountant Kim Myung-gyu posted on a personal thread a "friendly explanatory edition for nonexperts," analyzing various matters surrounding Cha Eun-woo's "20 billion won tax evasion allegations" that drew attention.
The tax evasion allegations against Cha Eun-woo remain at the "allegation" stage, but as many suspicious pieces of evidence have emerged, the public's view has cooled. If intentional tax evasion is proven, what would happen?
The host asked, "If intent is recognized, could he face a 20 billion won tax levy and criminal punishment?" and attorney Kim Myung-gyu replied, "Even if you pay the levy, if the National Tax Service deems it malicious it will refer the case to prosecutors and criminal proceedings will begin. There is an annual 1 billion won threshold for amounts obtained by fraud. If that threshold is exceeded, the Act on the Aggravated Punishment of Specific Crimes is applied, and once that law applies the statutory penalties can be life imprisonment or imprisonment of five years or more. Under our law, a prison term of three years or less can be suspended. In principle, due to application of the Act on the Aggravated Punishment of Specific Crimes, cases exceeding 1 billion won per year could result in imprisonment," he said, offering his expert view.
Cha Eun-woo is reported to have retained Sejong, one of the country's five major large law firms, and his agency Fantagio is said to have retained the large law firm YulChon. The host asked, "I heard they are preparing legal procedures regarding the National Tax Service's tax assessment. Will they have a legal dispute with the National Tax Service?"
Attorney Kim Myung-gyu said, "I think it's quite possible. A legal dispute with the National Tax Service would be a big issue, but criminal punishment could become a bigger issue. If you pay the full levy and sincerely show remorse, the judge may reduce the statutory minimum of five years in half through "mitigation based on weighing,"" adding, "If that happens, the sentence could fall into the 2 years and 6 months range, making suspension of execution possible. You have to pay the money and plead earnestly to avoid a prison term, and I think that's probably why they retained a major law firm."
To escape the tax evasion allegations, Cha Eun-woo must explain the lack of intent and prove that the eel restaurant his mother runs is not a paper company, attorney Kim Myung-gyu said. "The most urgent thing is to deny intent. Deny that it was done 'on purpose' or that it appears so. That's because we need to prevent criminal punishment. Claim it was a mistake due to not knowing the law, not a deliberate attempt to deceive. I think they will devote all efforts to proving this to prevent application of the Act on the Aggravated Punishment of Specific Crimes," he said, adding, "Another key point is getting recognition of the corporation's substance. They will need to gather new evidence that they couldn't submit during the National Tax Service investigation to persuade the Tax Tribunal or the courts. Prove there was no intent to avoid criminal punishment, and prove there was actual business activity to reduce taxes — they may use a 'two-track strategy.'"
An official channel of the Roel law firm also uploaded a video titled "Why Cha Eun-woo's 20 billion won tax evasion investigation involved the Investigation Bureau 4 and is not something to be let pass."
Criminal law specialist attorneys explained to the public in accessible terms about paper companies, the principle of substantive taxation, why Investigation Bureau 4 was deployed, and legal procedures after the 20 billion won levy notice.
Attorney Lee Tae-ho said, "Often these cases end up going all the way; in these situations entertainers usually negotiate to some extent with tax authorities. It's actually a bit different from criminal cases," and added, "We don't have plea bargaining in criminal cases in Korea, but they do discuss levy amounts with tax authorities. So most entertainers sign. They avoid fighting it and damaging their image."
Attorney Lee Won-hwa said, "But from Cha Eun-woo's position, a press release has already gone out, so there's no reason to negotiate," and attorney Lee Tae-ho cautiously speculated, "It could be that there was pressure in some way, and because negotiation didn't succeed and he didn't sign, they slapped the levy on him — that's my conjecture. It's not based on facts," to which attorney Lee Won-hwa agreed, "That could be."
Attorney Lee Tae-ho said, "Then from Cha Eun-woo's side, even if he later wins a tax lawsuit, the public will only remember this as tax evasion," adding, "In Yoo Jae-seok's case, he underwent a high-intensity tax investigation and had no levy payment because he deliberately paid more taxes. For example, he reduced expense claims even when he could have claimed them. If this continues, Cha Eun-woo's agency is worried that issues could arise during his entertainment activities and after his discharge."
Meanwhile, Cha Eun-woo last year underwent a high-intensity investigation by Investigation Bureau 4 of the Seoul Regional Tax Service before enlisting, and was notified of a tax levy exceeding 20 billion won. This is the largest levy imposed on an entertainer to date.
The National Tax Service judged that company A, established by Cha Eun-woo's mother, entered into a service contract with main agency Fantagio but was a paper company that did not provide substantial services. In fact, company A's address is an eel restaurant located on Ganghwa Island, making it difficult to handle entertainment-related work there. It is reported that authorities believe Cha Eun-woo and his mother set up the insubstantial company A and distributed income to apply a corporate tax rate more than 20 percentage points lower than the income tax rate, as a scheme to reduce the 45% income tax. They also treated the tax invoices Fantagio received from company A as false tax invoices and imposed taxes of 8.2 billion won. After being notified of a levy exceeding 20 billion won, Cha Eun-woo's side has appealed the National Tax Service's decision and is awaiting the "pre-taxation adequacy review" result.
[Photo] OSEN DB
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