Churches caught evading taxes

Posted on : 2012-06-26 15:22 KST Modified on : 2012-06-26 15:22 KST
Religious and welfare groups protest order to pay back taxes on unreported revenue
 where President Lee Myung-bak worships
where President Lee Myung-bak worships

By Kim Ji-hoon, staff reporter

Several large churches and a non-profit organization in Seoul’s Gangnam district have been making profits on properties that they own but neglecting to pay property tax. The law stipulates that religious facilities and buildings owned by welfare organizations are not subject to property tax, but their owners are obliged to report any profits earned on the use of these buildings.

From April, officials in Gangnam district conducted a two-month audit of the use of tax-exempt real estate. The audit revealed that 10 churches, including Somang, and Miral Welfare Foundation had been unfairly exempted from real estate tax. The local authority stated on June 25 that it is seeking more than 500 million won (about US$430,000) in back taxes from the organizations involved. The investigation was of 350 properties that were exempted of one million won or more in taxes, out of a total of 763 tax-exempt properties owned by churches and welfare organizations with addresses in Gangnam district.

Miral Welfare Foundation, a Christian organization that assists disabled people, was made to pay 343.39 million won in taxes. The audit revealed that the foundation runs a cafe in the basement of Miral School in Gangnam, and has built a 400m2 art museum that it rents out and a performance venue in the second basement floor that it has rented out to external users 83 times, making between 700,000 and 1.2 million won each time, bringing annual profits of at least 100 million won.

“These are profit-making operations not directly related to social welfare projects and are therefore subject to property tax,” said an official from Gangnam district office.

Somang Presbyterian Church, where President Lee Myung-bak worships, also earns money by running a café in the church building. The church didn’t report these earnings and therefore has been ordered to pay 6 million won in back taxes. The church runs a 120-seat café, as well as a bakery in one of its educational buildings in Gangnam district.

Chungwoon Church built a cultural and sports center in the basement of its main building in 2008, in which it has been operating a fitness club and charging membership fees for lectures on English and sports. Gangnam district office considered these profit-making operations to be unrelated to any religious events and levied 116 million won in property and acquisition tax from the church.  

Eight other churches in Gangnam were revealed to have profited by renting out some church buildings as office space or registered buildings in which other people lived as their pastors’ official residences, and were forced to pay a combined total of 41.55 million won in taxes.

It has also come to light that foundations and churches found to have illegally dodged taxes attempted to alter the outcome of the audit via civil servants and ward council members. “In May, when the report was being written, one civil servant came to see me and said, ‘I used to work with the current head of Gangnam district for Seoul Metropolitan Government. Please go easy on Miral Welfare Foundation in the audit’,” said one high-ranking Gangnam official involved with the audit.

“At around the same time, one member of the ward council telephoned us several times to ask for progress reports, including why the amount of tax to be levied from Chungwoon Church had increased in the course of the audit,” the official said.

“We have filed a lawsuit claiming that the ward’s measures are unfair, because we used the facilities for rehabilitation projects for disabled people, including performances and exhibitions, and invested the profits in related projects,” said one employee at the office of Miral Welfare Foundation.

A pastor in charge of administrative affairs at Somang Presbyterian Church said, “Many churches all over the country have been running cafes. It’s not right to now suddenly claim that this is wrong.” The pastor added, “We will pay the tax for now.” Unlike Miral Welfare Foundation, which was charged five years’ unpaid taxes by Gangnam district office, Somang has only been taxed on the profits it made in 2011. “In the case of Somang Presbyterian Church, we have not been able to determine when it started running the café, and so we have only levied taxes from last year,” said an official from the ward.

“This is the first time a local authority has conducted a comprehensive investigation of tax exemption on properties belonging to religious and social welfare organizations,” said Kim Jeom-gyun, head of Gangnam district office’s audit department, who planned the recent audit. “In other local authorities, such facilities lie in a blind spot.” Gangnam’ district office audit is prompting calls for the same investigation to be conducted nationwide.

Please direct questions or comments to []


button that move to original korean article (클릭시 원문으로 이동하는 버튼)