PM Nominee Chung Dogged by Tax Evasion Rumors

Prime Minister-designate Chung Un-chan today will face questions over alleged tax evasion and other supposed irregularities when his confirmation hearings begin at the National Assembly.

Lawmakers will also grill Chung on his alleged failure to report 150 million won (124,000 U.S. dollars) in royalty income; suspected draft dodging; duplicate publication of research papers in two journals; and his wife’s false registration of her residence to Pocheon County, Gyeonggi Province, apparently to evade taxes.

○ Tax evasion allegations

Lawmakers from the main opposition Democratic Party plan to question Chung over his alleged tax evasion. Rep. Kim Jong-ryul said yesterday, “Chung evaded more than 52 million won (40,000 dollars) in capital gains tax through a real estate contract by intentionally marking down the price for his apartment in Seoul’s Bangbae district, where he resides.”

“My analysis of data on property trading acquired from the Land, Transport and Maritime Affairs Ministry and information on his acquisition and registration taxes from the Seoul city government showed that he falsely marked down the land price for the reconstructed apartment in 2003 to 855 million won (711,000 dollars) from its recorded transaction price of 995 million won (820,000 dollars).”

Kim added, “By so doing, Chung paid 52.25 million won (43,200 dollars) less in property acquisition and registration taxes, including 7.27 million won (6,000 dollars) for land and 44.98 million won (37,200 dollars) for the unit.

“When paying acquisition and registration taxes for a reconstructed apartment, one must report to the tax office an amount combining both the land price and reconstruction cost, but Chung only reported the reconstruction cost he paid.”

Chung is also alleged to have evaded capital gains tax by using a contract using a price lower than he paid for an apartment in Seoul’s Ilwon district. He sold the unit in 2003.

He is also known to have not reported side income, including royalties for his books and consulting fees. Democratic Party lawmakers said Chung earned 150.97 million won (124,800 dollars) in publishing royalties from 2004 to last year, but failed to include this in his comprehensive income tax report.

Chung will also likely be questioned over whether he failed to report other income. He earned 95 million won (80,000 dollars) as an adviser to Yes 24, an online book retailer, from 2007 to last year, and rental income from his office-residential unit in Seoul’s Yeoksam district, including 650,000 won (540 dollars) in monthly rent and five million won (4,000 dollars) in a security deposit.

The prime minister-nominee is also suspected of dodging the draft. In his admissions application for Miami University in the U.S. state of Ohio in 1970, he said he was exempted from military service. This was not true, however, as he had simply delayed his conscription temporarily at the time.

Chung was exempt from active duty and was given reserve duty after taking a physical for military service in 1966. He got a full exemption after postponing his physical due to the death of his father two years later.

Also under question is Chung’s morality as a scholar. Rep. Choi Jae-sung of the Democratic Party said, “Chung has published 23 of his papers, including ‘The Korean Economy, Bursting of Bubbles and Institutional Reform’ and ‘Suggestions for Transformation of Korea’s Capitalism’ twice in two different journals.”

○ Questions over wife and son

Chung’s wife Choi Sun-joo, 59, is known to have falsely registered her residence to the township of Naechon in Pocheon County, Gyeonggi Province in 1988 before returning to her original residence in Seoul’s Bangbae district two months later. She never lived in Pocheon, and this is a violation of the Citizen’s Registration Act.

A painter of Western art, Choi told The Dong-A Ilbo that she “sold paintings in 2004 and 2007,” but that the transactions were excluded from her husband’s comprehensive income tax report.

A graduate of the applied arts department at Seoul National University in 1973, she began her painting career after showing her work at a group exhibition in 1999. She has done creative work for the past 10 years, holding individual exhibitions in 2004 and 2007.

Chung is also suspected of illegally transferring wealth to his eldest son, 31, whose credit card purchases from 2005 to last year far exceeded his annual income.

The junior Chung earned 1.96 million won (1,600 dollars) after getting his first job in November 2005, but spent 35 million won (30,000 dollars) on credit cards that year. He earned some 30 million won (32,000 dollars) in 2006, but spent 61.42 million won (65,000 dollars) on plastic the same year.

On this, Chung Un-chan said “His younger sister used his credit cards before she had a job, and he spent the money on activities at his alumni association and personal purposes.”

His son since last year has also driven a leased Volkswagen Golf costing around 30 million won (25,000 dollars).