Case Explained: Korea Taxpayers’ Association defends Cha Eun-woo amid tax evasion allegations – Legal Perspective

The Korea Taxpayers’ Association (KTA) has issued a statement defending actor Cha Eun-woo amid allegations of tax evasion, arguing that tax avoidance is a legitimate right and that the presumption of innocence must be upheld.

On Thursday, the KTA emphasized the legal distinction between avoidance and evasion. It cited U.S. legal precedents that recognize a taxpayer’s right to legally minimize taxes.

“Tax avoidance involves using legal loopholes to minimize tax liability. Until a Supreme Court ruling confirms illegality, it cannot be summarily labeled as evasion,” the association stated.

Responding to criticism over Cha establishing a corporation in his mother’s name, the KTA said incorporation for tax efficiency is not unlawful.

“Labeling a business a ‘shell company’ simply because it lacks physical facilities violates the presumption of innocence,” the KTA said.

The association cited a previous Supreme Court ruling involving a chicken franchise, which overturned a lower court’s conviction after determining the business had substantive operations.

The KTA also addressed the issue of allegedly false tax invoices. It acknowledged that issuing invoices without services is a criminal offense in Korea, but noted that similar actions are not treated as crimes in many European countries due to differences in invoice systems.

The group strongly condemned the apparent leak of Cha’s tax information. Under the Framework Act on National Taxes, disclosing confidential tax data is illegal.

“Details of a celebrity tax audit rarely surface without a leak from tax officials,” the KTA said, accusing the National Tax Service (NTS) of negligence for failing to investigate the source of the leak.

The KTA further criticized Korea’s punitive tax system, arguing that excessive penalties force taxpayers into delinquency. It pointed out that combined fines for underreporting and payment delays can exceed 120 percent of the original tax, and when additional charges are included, the total penalty can surpass 200 percent.

It noted that the delinquency rate for high-income earners reached 25.3 percent in 2024, attributing the increase to harsh penalties. This stands in contrast to nations like Sweden, which restrict excessive penalties under the principle of proportionality.

The KTA also criticized a 2023 NTS incentive program that awards tax officials 10 percent of the amount collected, arguing it encourages aggressive audits. The group pointed out that countries such as the U.S. legally ban the use of collection quotas in performance evaluations.

Citing Supreme Court precedent, the association said any tax assessment is invalid if an audit lacks proper grounds or violates due process. It added that investigators frequently fail to offer clear explanations for initiating audits.

“The reason wealthy individuals like Cha Eun-woo fear tax audits is not merely the financial burden, but the excessive criminal penalties, which can include life imprisonment for intentional evasion,” the KTA said, contrasting Korea’s strict laws with Sweden’s, which limits punitive measures under proportionality principles.

“Even if a violation occurred, punishment should remain within a reasonable scope and allow room for rehabilitation,” the KTA added, “Excessive collection and criminal sanctions undermine public trust in the tax system.”

This article from Xportsnews is adapted by a generative AI system and edited by The Korea Times.