The Terra co-founder now has more things to worry about as he faces a $78 million fine for tax evasion.
According to reports, the National Tax Service of South Korea has imposed a 100 billion won ($78 million) punishment for tax evasion penalties on Terraform Labs, its co-founder Do Kwon, and other officials.
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The Genesis
Local news sources claim that the tax authority initially started looking into Terraform Labs and its affiliates in June of last year on the grounds of the possible corporation and income tax cheating.
Two of the company’s subsidiaries were discovered to have foreign registrations in Singapore and the Virgin Islands. Even though the corporations were registered abroad, the actual administration of the businesses was done in South Korea.
Corporate tax regulations in the nation consider businesses with overseas registrations as local ones if their management and activities are carried out there. As a result, subsidiaries of Terraform Labs are obligated by law to pay taxes to the Korean government.
The tax authorities imposed a penalty of 44.7 billion won ($34.7 million) in corporation tax and 4.66 billion won ($3.6 million) in income tax on Terra’s Virgin Islands subsidiary in October.
Korean Tax Agency Suspects Tax Evasion
The article claims that in December of last year, Do Kwon expressed dissatisfaction with the country’s tax laws. Just before the devastating Terra LUNA accident earlier this month, he attempted to close down the company’s local offices and relocate abroad.
Terraform Labs delivered LUNA Terra Singapore to the LUNA Foundation Guard (LFG) during the UST incident, maybe to make up for the losses the anchor protocol incurred. The report also stated that the tax authorities saw the action as unusual, leading them to suspect that the corporation was attempting to dodge taxes.
Tax agency launches probes into suspected tax evasion
The tax office of South Korea announced on Tuesday that it has started looking into possible tax evasion by 59 individuals who are accused of keeping unlawful earnings or improperly accumulating wealth.
According to the National Tax Service, 29 of them used business funds to purchase luxury items while earning money unlawfully or dishonestly (NTS).
The government also took action against people and organizations that increased the assets of pandemic-affected merchants and individuals by causing harm to them.
Since last year, the NTS has successfully recovered outstanding taxes from high-income tax evaders and those who made money by extorting vulnerable people totaling 153 billion won ($130 million). Similar tax investigations have been ongoing since May. (Yonhap)
Tax agency reveals luxurious life of alleged tax evaders
Examples of what tax evasion suspects have done with the money they concealed from the tax office include buying a variety of super automobiles, including Lamborghini and Bentley, taking lavish trips abroad, and acquiring real estate.
The National Tax Service (NTS) said on Wednesday that it would look into 99 persons allegedly evading taxes. According to the tax office, this time the investigations are concentrated on those who are impeding fair commerce, elevating the burden, or interfering with the working class’s ability to support themselves.
In one of the examples detailed by the NTS, a pawnbroker sold high-end items that clients had pledged as security but failed to purchase them back at an internet marketplace for flea markets. The pawnbroker passed off the sales of jewelry, pricey watches, and bags, some of which were valued at hundreds of millions of won, as private person-to-person transactions to avoid paying taxes. The pawnbroker removed all of the sales when filing tax returns even though payments were made using borrowed bank accounts. The family of the pawnbroker lived in luxury, buying sports vehicles, taking vacations, and renting apartments.
Another instance featured a food producer who profited greatly from the rising recognition of Korean cuisine. The guy used accounts borrowed from family members to receive money and distributed increased sales to firms registered in his children’s names to escape taxes. Without ever having to work, the kids received hundreds of thousands of won annually and had access to 10 supercars, including Lamborghinis, Ferraris, and Bentleys.
Tax evasion was done by a private institution that specialized in instructing high school pupils who wanted to major in sports at universities. Students were also required to pay between 5 million won and 6 million won in consultation costs throughout the college entrance exam season in addition to their monthly tuition. The elite academy’s headmaster used the funds to buy real estate.
In light of a wide range of economic issues, such as inflation, high-interest rates, and slow economic development, the NTS said it would broaden its investigations to include areas connected to people’s lives.
More Lawsuits Against Do Kwon
Less than 24 hours after news broke that Korean investors had sued Do Kwon in both civil and criminal court, the $78 million tax fine was levied. As previously mentioned, UST and LUNA investors want the court to take Kwon’s property.
Do Kwon and Shin Hyun-Seong, co-founders of Terra, are also the targets of a class action lawsuit for fraud and unlawful crowdfunding from a different Korean organization named “Victims of Luna, UST Coins.”