Punishment Act Violation

Attorney Kim Dong-soo

On April 20, 2017, the Defendant was sentenced to three years and six months of imprisonment with labor for violating the National Sports Promotion Act (gambling, etc.) at the Changwon District Court’s Tong District Branch’s branch on April 20, 2017, and the said judgment became final and conclusive on September 29, 2017. The Defendant conspiredd to open and operate a private sports soil site that imitates “D and E’s official Internet site’F, which is a trustee of sports promotion betting tickets of the Korea Sports Promotion Foundation, and received five illegal sports gambling sites, such as “G”, using the foreign server from March 2014 to February 2016 without registering its business.

As seen above, the Defendant evaded KRW 3,797,291,301, as shown in the separate sheet of crime, by way of evading KRW 1,064,704,082 of value-added tax for the first year of 2014 by failing to report or pay to the competent tax office by July 26, 2014. The summary of the evidence was the same as indicated in the separate sheet of crime.

1. Partial statement of the defendant;

1. Partial statement of each prosecutor's protocol of examination of the defendant against the defendant;

1. Each prosecutor's interrogation protocol concerning B and H;

1. Each police suspect interrogation protocol of I, J, K, L, M, or N;

1. The police statement concerning B;

1. Investigative reports (Attachment of the relevant cases), investigative reports (Attachment of the judgment in the case of gambling out of the facts of previous convictions), investigation reports (verification of the amount of tax evasion), investigation reports (Attachment of evidential data for calculating the amount of tax evasion in illegal gambling sites operated by a suspect), criminal investigation reports (Attachment of evidential data for calculating the amount of tax evasion in illegal gambling sites operated by a suspect), written criminal complaints, written opinions, investigation reports (review reports on corporate data, such

1. Previous record of judgment: Resident inquiry and criminal records, and investigation report (the confirmation report of the fixed date);

Application of Statutes

1. Article relevant to the facts constituting an offense and the selection of punishment;

Article 8(1)1 and (2) of the former Act on the Aggravated Punishment, etc. of Specific Crimes (amended by Act No. 14474, Dec. 27, 2016); Article 3(1) of the Punishment of Tax Evaders Act (amended by Act No. 14474, Dec. 27, 2016; each tax evasion in 2014 and 2015; each of them is selected for a limited term of imprisonment and both penalties are imposed); Article 3(1) of the Punishment of Tax Evaders Act (Article 3(1) of the Punishment of Tax Evaders Act

1. Handling concurrent crimes;

The latter part of Article 37 and the first sentence of Article 39(1) of the Criminal Act

1. Mitigation following the handling of concurrent crimes;

The latter part of Article 39(1) and Article 55(1)3 and 6 of the Criminal Code

1. Aggravation for concurrent crimes;

Articles 37 (former part), 38 (1) 2 and 50 (in cases of imprisonment, the punishment for imprisonment and the penalty for concurrent crimes shall be limited to imprisonment with prison labor as provided for in the crime of violating the Act on the Aggravated Punishment, etc. of Specific Crimes (tax) due to the most severe tax evasion in 2015; in cases of fines, Article 20 of the Punishment of Tax Evaders Act on the grounds that Article 38 (1) 2 of the Criminal Act on the grounds that Article 38 (2) of the Act on the Aggravated Punishment, etc. of Specific Crimes does not apply

1. Discretionary mitigation;

Articles 53 and 55(1)3 and 55(1)6 of the Criminal Act (the grounds for sentencing below)

Articles 70 and 69(2) of the Criminal Act

1. Suspension of execution;

Article 62(1) and (2) of the Criminal Act (In case of imprisonment, repeated consideration of favorable circumstances among the reasons for sentencing under the following subparagraphs)

Judgment on Defendants and Defense Counsel’s argument

1. Summary of the assertion

A. Claims on the evasion of value-added tax

1) It was true that the Defendant was involved in the operation of five illegal sports gambling sites, including “G”, along with other accomplicess, but most of the proceeds of the instant gambling site did not actually belong to the Defendant, and thus, the Defendant, who is not the actual owner of the proceeds, is not a person liable to pay value-added tax.

2) Since the instant gambling site was operated by so-called E, the amount deposited in the account of the instant gambling site is not value-added tax because the instant gambling site users’ money deposited in the account of the instant gambling site falls under the instant gambling site’s money while gambling.

3) The entire amount deposited in the account of the instant gambling site cannot be deemed as the price for providing an opportunity to participate in gambling. The amount obtained by deducting the dividend paid to the instant gambling site users from the amount of entrance and the expenses for opening, operating, and managing the instant gambling site, namely, the profit actually acquired by the instant gambling site operator is a price for providing an opportunity to participate in gambling, and thus, the value-added tax evaded by the Defendant should be calculated based on such price.

4) The Defendant did not simply file a return of value-added tax without filing a business registration without actively concealing income, and did not engage in fraud or other unlawful act, and the Defendant did not fully recognize the occurrence of value-added tax and liability for the payment thereof due to the operation of the instant gambling site, and thus, tax evasion is not recognized.

B. The assertion on the evasion of global income tax

The Defendant’s income amount calculated on the basis of the Defendant’s statement and the details of the Pbank account in the name of the Defendant is difficult to recognize its rationality. In fact, the Defendant delivered most of the instant gambling site’s earnings to the merchant boat, and thus, it cannot be recognized that the Defendant evaded each comprehensive income tax indicated in the separate sheet of crime.

2. Facts of recognition;

According to the above evidence, the following facts are acknowledged.

A. The instant gambling site is: (a) 3-1-6-1-6-2-6-6-2-6-2--6-1-6-2--6-1-6-2--7-2--7--7--7--7--7--7--7--7--7--7--7--7--7--7--7--7--7--7--7--7--7--7--7--7--7-7--7-7-7-7--7-1--7-7-7--7-7-7-1--7-7-1--7-7-7-1-6-7-7-7-1-6-7-7-7-7-7-1-7-2-7-7-7-7-7-7-7-2, and the defendant's--7-7-25-26-7-7-7-7.

A. Whether the defendant is a taxpayer of value-added tax

1) According to the above facts and the evidence revealed earlier, it is reasonable to view that the Defendant jointly operated the instant gambling site with other accomplices, such as B andO, and thus, it is deemed that the Defendant constitutes a person liable to pay value-added tax as a joint business proprietor under Article 25(1) of the Framework Act on National Taxes.

2) As to this, the Defendant merely operated the instant gambling site upon the order of the merchant boat and stated to the effect that most of the proceeds of the instant gambling site was delivered to the merchant boat. However, the Defendant introduced the merchant boat or the merchant boat to the effect that it was not disclosed at all, and the Defendant did not submit objective evidence to confirm the existence of the merchant boat or the intermediary, and it is difficult to believe the Defendant’s above statement as it is. Even if there was a merchant boat ordering the operation of the instant gambling site, and most of the proceeds of the instant gambling site belong to the merchant boat, even if the Defendant actually operated the instant gambling site with other accomplices, it is difficult to view that the Defendant was exempted from liability to pay taxes because the Defendant did not fall under value-added tax.

3) Accordingly, we cannot accept this part of the Defendant and the defense counsel’s assertion.

B. Whether the money deposited in the account of the instant gambling site is subject to value-added tax

A person shall be appointed.

A person shall be appointed.

2) Relevant precedents

Value-added tax is imposed on the basis of value-added generated in all stages of production, provision, or distribution of goods or services. As such, value-added tax is a principle for imposing value-added tax on the distribution stage of goods or services that are newly created. Gambling is to determine the acquisition and loss of property by taking property among the participants and determining the acquisition and loss of property depending on the contingency or situation. Therefore, gambling is not a general creation of value-added tax, and it is not subject to value-added tax.

However, in the event that gambling business is conducted, if the customer’s money paid falls under the price for goods or services provided by the business entity, not merely a money for gambling, the value-added tax and the household reward. Therefore, if a sports gambling business entity provides customers with an opportunity to participate in gambling through the information and communications network built up, and receives money as consideration for such offer, even if the act promotes speculation, it constitutes the supply of goods or services with property value, and thus, it should be deemed subject to value-added tax (see, e.g., Supreme Court Decision 2016Do19704, Apr. 7, 2017).

3) Specific determination

Examining the instant case in accordance with the relevant statutes and precedents, in full view of the following facts and circumstances acknowledged by the aforementioned facts, the amount deposited into the account of the instant gambling site is not money for the instant gambling site users to receive the opportunity to participate in gambling by purchasing similar sports betting tickets issued and sold on the instant gambling site, but for receiving the opportunity to participate in gambling, namely, value-added tax and household prize. Accordingly, it is reasonable to view that this part of the Defendant and the defense counsel’s assertion is not acceptable.

① The instant gambling site was operated in the manner of issuing and selling similar sports betting tickets and paying and exchanging dividends to those who correctly predicted the outcome of sports games with financial resources.

② The operator of the instant gambling site was not directly engaged in property and participating in gambling with the purchaser of similar sports betting tickets, but merely paid the price for the issuance and sale of similar sports betting tickets, and only among the purchaser of similar sports betting tickets, the acquisition and loss of property was determined by the chance that only the purchaser of the similar sports betting tickets is the hostile importance of the outcome of sports games.

③ In purchasing similar sports betting tickets issued and sold on the instant gambling site, the amount paid shall be reverted to the operator of the instant gambling site immediately, and the amount paid shall be paid as dividends to those who correctly predicted the outcome of sports games, but the purchase price of similar sports betting tickets itself was not returned.

④ A person who purchased similar sports betting tickets issued and sold on the instant gambling site may enjoy and pay dividends from sports events using the instant gambling site, and thereby creating added value in this process.

C. Determination on the criteria for calculating the value-added tax base that the Defendant evaded

1) Relevant statutes

A person shall be appointed.

A person shall be appointed.

2) Specific determination

Examining the instant case in accordance with the relevant laws and regulations, ① the amount deposited in the account of the instant gambling site as seen in the foregoing Section 2(b) (No. 7-10th of the judgment) is the price for purchasing similar sports betting tickets issued and sold on the instant gambling site to receive an opportunity to participate in gambling, that is, value-added tax is imposed on the goods or services provided by the instant gambling site. ② The Korean Value-Added Tax Act taking the deduction method has the nature of the transaction tax imposed on the external appearance of transactions, not substantial income, unlike income tax and corporate tax, and the cost is excessive, regardless of whether or not the business owner’s interest or loss is imposed, and Article 29(5) of the Value-Added Tax Act stipulates, on such premise, that the amount of money deposited in the account of goods or services provided to the instant gambling site constitutes the price for receiving the goods or services provided to the instant gambling site, and thus, it does not constitute the amount of sales tax calculated by the instant gambling site, not the amount of sales tax paid by the Defendant under Article 38 of the Value-Added Tax Act.

(d) Whether to recognize fraud, other illegal acts, and intentional tax evasion;

1) Relevant legal principles

“Fraud or other unlawful act” in the crime of tax evasion stipulated in Article 3(1) of the Punishment of Tax Evaders Act refers to an act that enables the tax evasion, which is recognized as unlawful by social norms, i.e., a deceptive scheme that makes the imposition and collection of taxes impossible or considerably difficult. Therefore, it does not constitute mere failure to file a return under tax law or making a false return without accompanying other acts, but it does not constitute the mere failure to file a return under tax law or making a false return. However, in cases where circumstances indicate the intention of active concealment, such as intentionally failing to enter revenues or sales, etc. in the books, it may be recognized that the imposition and collection of taxes are impossible or remarkably difficult (see, e.g., Supreme Court Decision 2013Do865, Sept. 12, 2013).

2) Specific determination

Examining the instant case in accordance with the relevant legal principles, according to the above facts and the evidence revealed earlier, the Defendant may be recognized to have received money from the users of the instant gambling site through a large number of borrowed accounts without registering the business, and from the perspective of social average, it can be anticipated that the act of the Defendant constitutes “Fraud and other unlawful acts that objectively revealed the intention of active concealment” and the Defendant’s intent as to the evasion of value-added tax as indicated in the separate crime list is also recognized. Accordingly, this part of the assertion by the Defendant and the defense counsel is not acceptable.

3. Determination on the assertion on the evasion of global income tax

A. According to the above facts and the evidence revealed above, each global income tax listed in the separate sheet shall be deemed as the revenue of the instant gambling site acquired by the Defendant and calculated on the basis of the amount calculated based on the amount obtained by deducting KRW 33,971,205,715,715, which was paid to the instant gambling site users from the total amount of KRW 35,515,826,914, and the dividend paid to the instant gambling site users, and KRW 33,971,205,715 used for the operation and management expenses, exchange fees, and other expenses of the instant gambling site server. Such calculation method is an objective and reasonable method that can be generally acceptable and its result also can be deemed as having high probability and truth.

B. On the other hand, the Defendant asserted that the calculation of each global income tax stated in the separate sheet is unreasonable, solely on the grounds that most of the proceeds of the instant gambling site was delivered to the merchant boat, and the Defendant did not disclose all the personal information of the merchant boat and the specific time or amount of delivery of the proceeds of the instant gambling site to the merchant boat, and did not submit objective evidence to acknowledge it.

C. Therefore, we do not accept this part of the defendant and his defense counsel.

Reasons for sentencing

1. The scope of punishment by law;

(a) Imprisonment: One year and three months to eleven years;

B. Fines: 532,352,041 won or 1,330,880,102 won or 1,29,904,780 won or 3,074,761,948 won or 2. The sentencing guidelines are not applicable inasmuch as the former and latter concurrent crimes of Article 37 of the Criminal Act are based on the judgment of the scope of recommendations based on the sentencing guidelines and the latter concurrent crimes of Article 37 of the Criminal Act with respect to the tax evasion in 2015.

3. According to the sentence decision, the Defendant did not return or pay value-added tax and comprehensive income tax even when he received money for charging game money from users while operating the illegal sports soil site. This act of tax evasion is likely to disrupt tax order by making it difficult for the State to impose and collect taxes, thereby damaging the tax justice by exceeding the burden to the general public. Therefore, the crime liability is not easy, the total amount of the evaded tax amount is not less than 3.7 billion won, and the Defendant does not pay the evaded tax amount at all.

However, the crime of this case is a concurrent crime under the latter part of Article 37 of the Criminal Act with regard to the violation of the National Sports Promotion Act (Gambling, etc.), etc. for which judgment has become final and conclusive. The equity between the defendant and the other concurrent crimes under the latter part of Article 37 of the Criminal Act should be taken into consideration. The defendant's crime of this case is close to the crime of tax evasion in the course of committing the crime of violating the National Sports Promotion Act (Gambing, etc.) rather than for the purpose of tax evasion itself. The defendant was sentenced to imprisonment with prison labor for a considerable period due to the violation of the National Sports Promotion Act (Gambing, etc.), and the defendant's age, growth process

Judge Political decoration

Judge Lee Sang-hoon

(1) National taxes, additional dues, and expenses for disposition on default related to the jointly-owned property, joint projects, or property belonging to such joint projects shall be jointly or severally

jointly and severally liable for payment.