Attempt to Avoid Tax
It has been found that Macquarie Korea Infrastructure Fund (MKIF), which is the sole owner of the companies running the Sujeongsan and Backyang Tunnels, paid a total of 11.2 billion won(US$9.6 million) in corporate tax, equivalent to less than one billion won a(US$8 million) year. In addition, they paid no corporate tax at all from 2004 to 2009, during which the companies recorded 133.6 billion won(US$116.5 million) in cost-excluded operating profits and 60.4 percent in average operating profit ratio.
In principle, the companies should have paid 30 percent of their net profit in corporate tax. However, MKIF took interests equivalent to four to five times the market interest rate by lending the operators its money. Specifically, MKIF’s interest earnings from the tunnel operators amounted to 106.5 billion won(US$92 million) during the past 12 years. This caused the operators’ net profit to drop along with their corporate taxes.
The capital of the companies are currently impaired, due to their payment to MKIF, in spite of their toll income and local-government financial assistance. MKIF has invested in 12 social overhead capital facilities in Korea and took 1.5421 trillion won(US$1.3 billion) in interest income between 2004 and 2014.
MKIF has paid no corporate tax for 12 years by paying more than 90 percent of its profits as dividends to investors. It explained that it is a fund and thus does not have to pay any corporate tax except for the dividend income tax paid by investors.