If a tax invoice is suspected to have been issued without an actual transaction, a massive penalty may follow.

Professor Park(Setting down the papers) So, the tribunal ruled against the companies.

Professor Kim(Nodding) Yes, it was expected. Since their transactions had the appearance of circular trading, the tax authorities had reason to suspect them as fabricated.

Professor ParkBut these companies submitted 20 boxes of supporting documents—photos of construction sites, travel expenses, contracts. I wonder if the tax office relied too much on appearances rather than actual evidence.

Professor KimThat’s the key issue. Case law suggests that just because money moves in a circular pattern doesn’t automatically mean the transactions are fake. But in this case, there were some critical problems.

Professor Park(Skeptical) Such as?

Professor KimFor one, the invoices were issued at identical times for the same amounts across multiple companies. Also, the CEOs were either former employees of each other’s firms or related by marriage. That’s not a normal subcontracting pattern.

Professor ParkHmm... but isn’t it common in the interior construction industry for small firms to subcontract work back and forth?

Professor KimThat’s true. But the real issue is the lack of consistent documentation. For example, the invoice amounts were predetermined at the beginning of the year, which is highly unusual for construction projects.

Professor Park(Folding his arms) But the tax office’s argument isn’t flawless either. Even if the transactions appear circular, they should still be considered legitimate if actual work was done, right?

Professor KimYes, but the companies failed to provide critical evidence like cost breakdowns and detailed work reports. In a typical subcontracting transaction, such records are essential.

Professor ParkSo, it all comes down to the burden of proof. The tax office used transaction patterns and financial analysis to argue their case, while the companies couldn’t provide enough evidence to counter it.

Professor KimExactly. Normally, the burden of proof falls on the tax authorities, but once they provide substantial evidence, the burden shifts to the taxpayer. In this case, the companies failed to meet that burden.

Professor Park(Sighing) If nothing else, this shows that businesses need to maintain much stronger documentation to avoid these situations.

Professor KimAbsolutely. Especially in industries where circular transactions might be suspected, firms must keep meticulous records of their finances and contracts.

Professor Park(Taking another sip of coffee) This case really highlights something important—whether it’s tax law or accounting, everything ultimately comes down to credibility.

Professor Kim(Smiling) That’s exactly right. No matter how unfair it seems, without reliable evidence and a consistent story, it’s difficult to win in a legal or tax dispute.

Professor Park(Nodding) This would be a great case study for our students.

Professor KimGood idea. We should analyze it in class next time.

Professor ParkAgreed. We could even turn it into a mock trial exercise.

(They continue organizing their materials, preparing for the next lecture.)