Firms Accused of Evading 70 Billion Won in Taxes Through Rigged Wildfire-Recovery Bids Face Audits

Ten companies accused of repeatedly rigging public bids for wildfire recovery with the help of shell firms are now facing tax audits in South Korea.

The National Tax Service said on Sept. 3 that it had begun auditing the companies after detecting signs of tax evasion. The firms allegedly used 41 shell companies over the past six years, including during wildfire-recovery projects following fires in North Gyeongsang Province last year.

Investigators suspect the companies participated in about 6,500 improper bids and won roughly 260 of them. The winning contracts had a combined value of about 23 billion won. The suspected tax evasion totals 70 billion won, a larger figure because transactions involving false tax invoices were counted as evasion by multiple companies.

The firms allegedly moved their registered offices repeatedly to bypass regional bidding restrictions designed to protect small local businesses. In one case, a forestry contractor based mainly in North Gyeongsang used six shell companies and shifted their business locations among South Chungcheong, North Chungcheong and North Jeolla provinces. The contractor allegedly entered around 300 “grasshopper bids” for wildfire-recovery work and won more than 20 contracts.

The National Tax Service said the contractor created several billion won in false invoice transactions among the six companies to meet performance requirements. The contractor also allegedly diverted about 1 billion won in corporate funds as salaries for a spouse and other nominal representatives who did not actually work for the companies.

Officials further suspect that the contractor inflated workers’ workplaces and employment periods in payment statements, recording about 1 billion won in fabricated costs. National Tax Service investigation chief Lee Seong-geul said officials would examine the source of assets accumulated through alleged improper methods and refer families of company owners for prosecution if they meet the requirements under the Tax Offenses Act.

“

Rigged bidding through shell companies can be eradicated only when thorough tax verification of illegal and tax-evading conduct prevents them from enjoying the economic gains.