Unjust Labor Cost Accounting and Price Hikes to Evade Taxes... 319.5 Billion Won Collected from Tax Evasion Fueling Price Instability

National Tax Service Completes Investigation of 114 Companies from September Last Year to June This Year
Assessed Amount Reaches 769.8 Billion Won, 33 Cases of Criminal Tax Penalties

Despite a decline in international prices for key raw materials, Food Manufacturer A took advantage of its oligopolistic position to raise product prices and enjoy a boom. According to a National Tax Service investigation, the company unfairly accounted for about 30 billion won in labor costs for dispatched employees that should have been borne by its clients, and about 1 billion won in raw material costs purchased at high prices from related-party companies. As a result, the company was assessed an additional tax of approximately 9 billion won.

Comprehensive food manufacturer B used its dominant position in the oligopoly market to increase product prices by about 5%. The investigation found that the company paid around 20 billion won in entertainment-type sales incentives to distributors to secure store placements and maintain trading relationships, and disguised these payments as logistics costs in its accounting records. The National Tax Service confirmed that the company provided about 15 billion won in benefits to related-party companies through excessive outsourcing service fees and other methods, and collected approximately 20 billion won in additional taxes.

The National Tax Service announced on July 12 that, from September of last year to June of this year, it conducted a tax audit on 114 companies involved in monopolistic or oligopolistic practices, collusion, and the supply of processed foods, agricultural, livestock, and marine products, daily necessities, and dining-out franchises, which had made windfall profits by raising prices but failed to report their income properly. The audit resulted in a total tax assessment of 319.5 billion won. The top 10 companies accounted for 248 billion won, representing about 78% of the total additional tax collected.

According to the National Tax Service, a beverage and food manufacturer was found to have circumvented volume limits and obtained tariff benefits by importing raw materials through a conduit company established under the name of a retired employee, while receiving false tax invoices. As a result, the National Tax Service collected 7 billion won in additional taxes for the improper input tax credit. Individuals involved in tax evasion, such as violations of tax invoice issuance obligations, were subject to criminal tax penalties.

A company that participated in collusion in public institution bidding was found to have illegally spent several hundred million won in collusion fees and claimed a tax credit for about 8 billion won in wages for non-dedicated research personnel, even though these were not eligible for the research personnel tax credit. Accordingly, approximately 4 billion won was collected in additional taxes.

The large F&B franchise under investigation enjoyed the effects of a price increase through so-called 'shrinkflation,' reducing product volume instead of raising prices. The investigation found that the company provided benefits to related-party companies by purchasing raw materials at inflated prices through intermediary transactions. In addition, the National Tax Service confirmed that the company unfairly supported affiliates by paying more than 2 billion won in promotional expenses on their behalf, and evaded roughly 70 billion won in corporate income, resulting in an additional tax assessment of about 20 billion won.

The National Tax Service stated that, in line with the government's policy of prioritizing price stability for people's livelihoods, it will take strict action against tax evaders who unfairly make excessive profits and increase the financial burden on ordinary citizens.

A National Tax Service official said, "We will continue to monitor industries with dominant power by specific companies, industries where collusive practices are frequent, and those closely linked to people's daily lives. Companies found to have excessively raised prices under the pretext of economic conditions while evading taxes will be immediately selected for investigation. During investigations, we will utilize all possible means, including temporary seizure and tracking of financial accounts, to thoroughly verify facts. If tax evasion or the issuance of false tax invoices and other criminal tax acts are detected, we will take firm action to ensure they are punished in accordance with the Tax Evaders Punishment Act."

This content was produced with the assistance of AI translation services.