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Hana Financial falls over unpaid tax bill of 1 trillion won

Hana Financial Group Inc fell to its lowest level in almost four months in Seoul trading on a report that it may have to pay more than 1 trillion won (US$1.1 billion) in back taxes and penalties, an amount almost equivalent to last year's profit.

Hana, South Korea's fourth-largest financial services company by market value, closed down 4.2 percent at 42,150 won, the lowest since Oct. 25. That compared with the benchmark Kospi index's 1.4 percent gain.

"If you consider Hana's annual net income is just over 1 trillion won, the taxes it faces are a huge amount," said Koo Kyung-hwe, a Seoul-based analyst at Hyundai Securities Co.

South Korea's tax authorities are seeking between 1.3 trillion won and 1.7 trillion won in taxes and penalties from Hana, saying tax benefits its Hana Bank unit received for acquiring Seoul Bank in 2002 were inappropriate, the JoongAng Ilbo newspaper reported yesterday. The Finance Ministry told revenue authorities it was permissible to tax Hana Financial, the report said.

Hana Bank was advised by a Seoul tax office of the imposition of additional corporate taxes related to the merger with Seoul Bank in 2002, parent Hana Financial said in a regulatory filing yesterday.

"We will first pay the taxes if asked and take appropriate follow-up measures later," a Hana Financial spokesman said.

The National Tax Service argues that Hana illegally received tax reductions allowed for unprofitable companies by making it appear as though money-losing Seoul Bank took over Hana, the JoongAng report said. The deadline to pay taxes is the end of next month.
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