(코리아타운 뉴스) “What the Government Warning on Tax Evasion Means”

Heavy sanction on Fashion Q
$7.6 million in additional charge and two years of imprisonment
“Sanctions increased as evasion was clearly intended”

The Tax Recovery and Criminal Enforcement (TRaCE) has imposed Fashion Q, one of the largest apparel businesses in the Korean-American community, with a $7.6 million in additional fine and two years of imprisonment. It has prompted a public reaction that the heavy sanction is a historically rare decision.

Some are even suggesting that the TRaCE may have a different motive for imposing such a strong penalty on the business.

“Tax evasion is a serious case which the government must investigate thoroughly and completely,” said Venus Stromberg, an officer at the California Department of Tax and Fee Administration. “This is a warning on criminal acts in relation to tax evasion.”

Stromberg also confirmed that the fines have been imposed on the owner of Fashion Q.
However, certified public accountants in the Korean-American community said that tax evasion rarely leads to imprisonment, but that the authorities could have made the ruling based on the evidence that Fashion Q has committed a criminal act intentionally.

TRaCE revealed that Fashion Q’s owner did not report $29 million in sales, $39 million in income, $8 million in wages, $5.7 million in sales, income and payroll taxes, $7 million in insurance fees and $350,000 in workers’ compensation. Authorities often perceive tax evasion worth at least 25 percent of one’s income as an intentional act.

Aside from the recent Fashion Q case, the FBI also launched a raid on many of downtown-based apparel businesses three years ago over money laundering and drug trafficking. The businesses subject to investigations are still waiting on the final ruling.

“I do wonder if the authorities are turning to tax evasion after failing to find evidence on money laundering and drug trafficking allegations,” said a source within the apparel industry.

Another large-scale apparel business owner said: “Imprisonment sounds extremely harsh and Fashion Q may have been used as an example to show what could happen if one evades taxes. However, it’s true that they have been clamping down on tax investigations. Unless you abide by the law completely, it’s difficult to run a business nowadays.”

It was initially revealed that Fashion Q is operating over 50 locations across the country, but TRaCE investigations have found that the business is running around 110 to 120 stores.

Many of those stores are in direct business with Korean-American manufacturers. Even though Fashion Q is now embattled with tax issues, it has made timely payments to its vendors and played a key role in helping Korean-American businesses to maintain their operations smoothly.