A court has ruled that merely reporting suspected tax evasion is not sufficient to receive a reward. The ruling holds that whether the informant provided data capable of confirming specific facts of tax evasion is the key requirement for paying a reward.
According to legal circles on the 20th, the Seoul Administrative Court's Administrative Division 6 (presiding judge Na Jin-i) ruled against the plaintiff in May in a lawsuit filed by A against the head of the Guro Tax Office, seeking to overturn a decision denying payment of a reward.
A reported suspected tax evasion to the Seoul Regional Tax Office in May 2023. The report stated that Corporation B ran a profit-making business earning revenue by leasing officetels, yet used a nonprofit corporation as a front to improperly obtain a refund of approximately 8 billion won in value-added tax on construction costs.
The Guro Tax Office, which received the referred tax evasion tip, selected Corporation B as a subject of investigation and conducted a tax audit. The investigation confirmed that Corporation B had received an excessive VAT refund, and the Guro Tax Office corrected and notified an assessment of approximately 7.9 billion won in VAT.
The case began after A applied for a reward for the tax evasion report. However, the tax office denied payment, stating that the data submitted by A did not qualify as "important data" eligible for a reward under the Framework Act on National Taxes. Article 84-2 of the Framework Act on National Taxes stipulates that a reward may be paid to a person who provides important data in uncovering tax evasion.
A then filed an administrative lawsuit. A argued that because the tax office discovered the evasion facts it had not previously identified thanks to A's report, the reward should be paid.
However, the court sided with the tax office. The court determined that the data submitted by A alone could not confirm the facts of tax evasion, nor could it be seen as having made a direct or substantial contribution to calculating Corporation B's evaded tax amount.
The court pointed out, "The content of the tax evasion tip and the grounds for the assessment in this case do not match." A had reported that Corporation B used a nonprofit corporation as a front to improperly obtain a VAT refund. However, the tax office confirmed that Corporation B leased officetels as housing while receiving a larger VAT refund on construction costs than it actually should have.
The court further ruled, "The tax office analyzed the overview of the new construction of the multi-unit building and the registration records of the housing rental business operator, then selected the corporation as a subject of investigation, and conducted a tax audit that included identifying officetels used for permanent residential purposes." This means the tax office confirmed the specific facts of Corporation B's tax evasion through the tax audit process, rather than through A's tax evasion tip.
