[Sejong = E-Daily Reporter Kim Mi-Young ] Mr . A, who was engaged in forestry projects in the North Gyeongsang Province area, formed an “organization” by mobilizing five shell companies and then frequently moved his operations to South Chungcheong, North Chungcheong, and North Jeolla Provinces. This was a “grasshopper-style” ploy designed to circumvent regional bidding restrictions intended to protect local small and medium-sized enterprises. Using this method, Mr. A’s organization participated in as many as 300 bids for wildfire recovery projects alone and won contracts on about 20 occasions.

It was also revealed that Mr. A engaged in active tax evasion. To meet bidding performance requirements, he exchanged fake tax invoices worth hundreds of millions of won among the shell companies, and embezzled approximately 1 billion won in corporate funds under the guise of salaries to nominal representatives—such as his spouse—who did not actually work for the company. He also paid forest management technicians “certification rental fees” disguised as salaries and falsified pay stubs for day laborers to inflate construction costs by 1 billion won.

As the so-called “wildfire cartel”—which abuses public works projects intended to restore land and people’s livelihoods devastated by wildfires as a means to line their own pockets—has emerged as a social issue, tax authorities have stepped in.

The National Tax Service announced on the 3rd that it had launched tax audits targeting 10 forestry companies—among those, like Mr. A, who used shell companies to corner the market on wildfire recovery projects—that are strongly suspected of tax evasion. As part of tax audits aimed at eradicating corruption in public contracts and local graft, the agency is now specifically targeting companies participating in public bidding that had previously fallen through the cracks of tax scrutiny due to their small scale.

For this investigation, the National Tax Service first conducted a comprehensive analysis of 5,331 companies that participated in wildfire recovery projects over the past six years, based on the Public Procurement Service’s bid announcements. Among these, it closely tracked the transaction records of 138 companies with winning bid amounts of 1 billion won or more and identified those with clear signs of tax evasion—such as the exchange of fraudulent tax invoices and the reporting of fictitious costs—as targets for investigation. Although there were only 10 companies involved, they had established as many as 41 shell companies. The total amount of alleged tax evasion by these entities is approximately 70 billion won.

Mr. B, who used five shell companies in the Gangwon Province area to win about 20 out of 200 bids, employed a method similar to Mr. A’s. Mr. B’s organization exchanged false tax invoices worth 2 billion won among affiliated companies and falsely claimed approximately 3 billion won in fictitious costs—including by submitting false payroll statements that overlapped the work locations and periods of daily laborers. It was also revealed that Mr. B used the evaded corporate funds and credit cards for personal expenses, such as purchasing luxury watches, while his spouse—who had no income—purchased real estate worth approximately 2 billion won using funds of unknown origin.

The National Tax Service plans to thoroughly collect the evaded taxes from these companies, which exploited the relatively simple verification process for small businesses and structural loopholes in the public contract bidding system to gain undue profits.

Lee Seong-geul, Director of the Investigation Bureau at the National Tax Service, stated, “Since tax crimes—such as the exchange of false tax invoices—often accompany bid-rigging, we will ensure that those who meet the requirements under the Tax Crime Punishment Act are punished without exception.” He added, “We will track down companies involved in bid-rigging for public contracts that misuse government projects as a tool for personal gain, regardless of their size.”