South Korean companies spent a record high of 10.9 trillion won ($9.6 billion) on entertaining clients last year despite the introduction of the anti-graft law, which was expected to discourage businesses from soliciting customers with expensive meals and gifts.
According to National Tax Service’s data submitted for parliamentary audit on Wednesday, companies that filed corporate tax last year spent total 10.9 trillion won on entertaining clients, marking a 9.3 percent on-year jump.
Business entertainment expenses of Korean firms have been on a steep rise since the spending topped 7 trillion won in 2008, and the government’s efforts to curb the trend with a powerful anti-corruption law does not seem to have been effective yet, the latest data indicated.
In Korea, giving expensive meals and gifts to clients in hopes of improving business relationship has been a normal business practice, but it has been blamed for wide-spread corruption in private business and public services. To end such malpractices, the government last September enforced an anti-corruption law, dubbed Kim Young-ran law who first proposed the bill 2012, with tough limits on accepting expensive gifts and meals. The act bans public servants, journalists and teachers from being treated with a meal costing more than 30,000 won.
While companies’ overall spending to entertain clients had grown last year, the spending at bars that take large portion of business entertainment expenses fell to 1.0 trillion won from 1.4 trillion won in 2011, based on corporate credit card spending data. Payments made with company credit cards at lounge bars shrank 36 percent to 590.5 billion won last year from 923.7 billion won in 2011, and spending at less-expensive karaoke bars also dropped 22.6 percent to 180.4 billion won during the same period.
But the corporate credit card spending at an exclusive private club, which provides a private dine and wine service attended by female entertainers, rose 6.9 percent on year to 110.4 billion won, hinting that business solicitation practice has become more covert. The spending at exclusive clubs during a 12-month period since the enforcement of the anti-graft law on September last year hit 132.3 billion won and exceeded total amount spent in a year before the implementation.
By Boo Jang-won
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