In a climate of rising prices, numerous companies have been caught excessively inflating prices and failing to report taxes properly during investigations by the National Tax Service (NTS). Cases have been identified where companies exploited monopolistic positions or engaged in shrinkflation, effectively raising prices while diverting income through improper support to affiliates and outflows of funds to owners.
On July 12, the NTS announced that it had recovered 319.5 billion won from 114 companies, following tax investigations conducted from September last year to February this year, targeting 117 companies suspected of tax evasion related to price instability.
The investigation focused on companies that profited excessively from price hikes while failing to report income accurately, including monopolistic firms, colluding companies, those misusing foreign exchange and tariff allocations, as well as businesses in processed foods, agricultural products, essential goods, restaurant franchises, and funeral services.
The total amount identified by the NTS was 769.8 billion won. Among the top 10 companies, the total tax amount recovered was 248 billion won, accounting for approximately 78% of the total recovery.
In terms of categories, 9 monopolistic companies were responsible for 180.9 billion won in recoveries. Fifteen companies involved in foreign exchange misuse and tariff allocation accounted for 58.5 billion won, while 29 restaurant franchise headquarters were responsible for 35.9 billion won.
Additionally, 34 companies in processed foods, agricultural products, and essential goods had recoveries totaling 20.4 billion won, while 17 funeral service companies accounted for 14 billion won. Ten colluding companies were responsible for 9.8 billion won in recoveries.
The NTS confirmed 33 cases of tax violations, including tax evasion and the receipt of false tax invoices, with 13 of these cases referred for prosecution.
In one notable case, a comprehensive food manufacturer used its dominant market position to raise product prices by about 5%. The investigation revealed that this company paid approximately 20 billion won in promotional incentives to distributors, disguising it as logistics costs. It was also found that the company improperly transferred about 15 billion won in profits to an affiliated company by overpaying for outsourced services, leading to a recovery of around 20 billion won.
Another food manufacturer raised prices despite a decline in international raw material prices, exploiting its monopolistic position. This company was found to have improperly accounted for about 30 billion won in labor costs for dispatched workers and high-priced raw materials purchased from an affiliated company, resulting in a recovery of about 9 billion won.
Instances of misusing tariff benefits were also uncovered. A beverage manufacturer circumvented quantity limits to receive tariff benefits by using a company registered under a retired employee's name to import raw materials and received false tax invoices. The NTS recovered over 7 billion won in related input tax credits and reported individuals involved in the issuance of false invoices.
A large food and beverage franchise company effectively raised prices by reducing product sizes, a practice known as 'shrinkflation.' The investigation revealed that the company funneled profits through high-priced purchases from affiliated companies and covered promotional expenses for affiliates, resulting in an estimated tax evasion of about 70 billion won, leading to a recovery of approximately 20 billion won.
A well-known coffee franchise raised coffee prices citing increased costs of imported beans, but it was revealed that about 2 billion won was funneled to the owner's family through processed payments. Additionally, it was found that the owner's children received about 4 billion won for real estate and stock purchases without reporting gift taxes, leading to a recovery of about 4 billion won.
There were also cases of essential goods manufacturers inflating prices by several dozen percent while receiving false tax invoices without actually supplying goods or services. This company evaded about 3 billion won in corporate income tax, resulting in a recovery of about 2 billion won.
Tax evasion was also detected in a funeral service company. A well-known funeral service provider raised prices by launching new products similar to existing ones while discontinuing the old ones. The investigation revealed that the company improperly supported affiliates by exceeding shared expenses by about 3 billion won and paid over 1 billion won in labor costs to family members and housekeepers who did not actually work, leading to a recovery of about 5 billion won.
The NTS plans to continue monitoring monopolistic industries, sectors prone to collusion, and those closely related to people's livelihoods. Companies found to have excessively raised prices under the pretext of economic conditions while evading taxes will be immediately selected for investigation.
During the investigation process, the NTS will utilize all available means, including temporary storage and tracking financial accounts, to verify tax evasion. If tax evasion or the receipt of false tax invoices is detected, strict measures will be taken in accordance with tax evasion laws.
* This article has been translated by AI.
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