Financial investigators revealed Thursday that Chonghaejin Marine Co. had not paid anything in corporate taxes in the past five years, due to exemptions given to the operator of the Sewol ferry because of previous losses.

While a company operating in the red is entitled to some tax exemptions, the Financial Supervisory Service is looking into its financial statements to examine the possibility that the company had manipulated its books to evade taxes.

The National Tax Service is also reviewing the company’s taxation records, as it is not ruling out the possibility that the company might have exploited legal loopholes.

In its reports to financial regulators, Chonghaejin Marine said that some of its operating profit had gone to make up for past losses. Tax deductions or exemptions are possible when an enterprise reduces its earnings to offset former losses.

The marine company notified the FSS of its bookkeeping records, which read that it fell into the red in 2011, with a loss of 511 million won ($486,000).

Though the company said it posted a net profit of 252 million won in 2012, it again reported a deficit of 785 million won in 2013.

Between 2009 and 2013, Chonghaejin Marine reported combined sales and operating profit of 141.6 billion won and 1.4 billion won, respectively.

An FSS official said the company was estimated to have enjoyed the tax exemption over the past five years, during which it offset losses with a portion of its earnings.

He said regulators would seek to verify whether the practice was legitimate, and whether the company’s bookkeeping was in keeping with accounting rules.

Meanwhile, the FSS said it launched a full-scale investigation into several financial firms over their possible illicit lending to passenger vessel operators.

First-tier banks and other financial firms will likely be obliged to inform the FSS of their loan issuance records to passenger vessel operators including Chonghaejin Marine.

By Kim Yon-se (kys@heraldcorp.com)