NTS launches tax probe into 41 firms accused of stoking price instability

The National Tax Service said Monday it has launched tax investigations into 41 companies suspected of evading taxes while driving up prices, ahead of the Chuseok holiday.

The NTS said it had identified tax evasion suspects among businesses closely tied to everyday living costs — including agricultural and livestock distributors, processed food makers, restaurant franchise operators and delivery platforms — as well as consumer goods platforms.

The 41 targets include 23 agricultural and livestock distributors, 16 processed food, restaurant franchise and delivery platform companies, and two fashion platform firms. Total suspected tax evasion amounts to 1 trillion won ($743 million). The group comprises eight mid-sized companies and 33 small and medium-sized enterprises, two of which are listed on the Kospi.

The NTS dispatched investigators to 16 delivery, processed food and restaurant franchise companies suspected of passing excessive cost burdens on to consumers.

Baemin is suspected of offshore tax evasion — routing roughly 1 trillion won in domestic profits to its German parent company through complex capital transactions while failing to pay around 100 billion won in withholding taxes owed in South Korea.

The company also faces allegations of providing business support services to overseas affiliates free of charge and improperly claiming value-added tax input deductions.

The NTS said it launched the probe after focusing on the practice of shifting large promotional costs onto restaurant and supermarket partners in the form of commissions and advertising fees.

Twelve processed food companies are also under investigation. Company A, a sauce and mandu manufacturer that recently raised prices on some products, is suspected of overpaying fees to a related company set up by a former executive and covering warehouse rental costs for a firm controlled by the owner's children — moves the NTS believes were used to siphon off profits.

The NTS said evidence also emerged that the company wired large sums to an overseas subsidiary — where the owner's child works as a division head — under the guise of investment funds, apparently to build an offshore slush fund.

Company B, a comprehensive food company listed on the Kospi, sharply raised processed food prices citing higher raw material and logistics costs. The NTS believes the company in practice padded its product costs with expenses that should have been borne by domestic and overseas affiliates, effectively passing those costs on to consumers.

The company also faces allegations of covering expenses that should have been charged to related companies controlled by the owner's family — with no business justification — and of extending large sums to overseas affiliates without collecting interest.

The NTS said the owner received shares in an affiliate from his father as a gift but failed to file a gift tax return.

Franchise C, which operates 2,000 franchise locations nationwide, is suspected of disguising the owner's personal expenses as costs related to supporting franchisees.

The NTS said the company transferred profitable directly operated stores to a firm controlled by the owner's children at no cost, then absorbed unreasonable losses by supplying ingredients at below-market prices.

Franchise headquarters D came under scrutiny after its owner was found to have operated franchise locations under employees' names to spread income across multiple taxpayers. The company also faces allegations of acquiring three supercars — each worth hundreds of millions of won — under the corporate name for personal use.

The NTS found that the company collected supervision fees and various rebates from contractors handling franchise interior work and concealed the proceeds. It also improperly deducted startup consulting fees paid by prospective franchisees as losses to underreport revenue.

The NTS is investigating 11 poultry farms — focusing on those sanctioned for price-fixing conduct so egregious it gave rise to the term "golden egg" ("geumnan") — on suspicion of underreporting tens of billions of won in income over three to five years.

Company E is suspected not only of charging inflated egg prices but also of demanding invoice-free, off-the-books transactions from clients and receiving sales proceeds through non-business accounts to conceal the income.

The company is also suspected of transferring egg-laying chicks to another agricultural corporation run by a family member at below-market prices to funnel profits there, and of failing to report government subsidies received from local authorities as income.

Company F is suspected of exploiting a tax exemption for farmers and fishers — which exempts livestock income below a certain number of animals — by setting up a shell poultry farm in the name of the owner's spouse to split sales and pay no taxes at all.

The NTS said the company exchanged false invoices to make it appear that chicks purchased from third parties had been sourced from the spouse's farm.

Businesses that received quota tariff benefits while inflating expenses or omitting sales from their tax filings were also included in the investigation.

Company G, which imported pork under a zero-percent quota tariff rate, is suspected of inserting a shell business registered in the name of the owner's child into the distribution chain to pocket the margin, then quickly shutting it down to retain the tariff benefits.

The company also paid hundreds of millions of won in salary to relatives of the owner who performed no work, routing the payments through affiliated companies to fabricate expenses.

Company H, which imports sesame and other goods, is suspected of setting up a front company to secure additional import volumes under low tariff rates and then diverting sales revenue to that front company.

The owner's spouse, despite having no significant independent income, is suspected of siphoning corporate funds to acquire multiple apartments and making cash gifts to their children.

Two fashion platform companies are also under NTS investigation. The NTS believes they used their dominant market position to drive broader price increases across the fashion sector.

The companies face allegations including deliberate underreporting of sales through irregular accounting, overpayment of advertising and service fees to related companies, and inflating costs through overpriced inventory purchases. The NTS also found that the owners personally resided in high-priced apartments leased in the companies' names.

The NTS said the companies leveraged their dominant platform usage to impose high commission rates on partner merchants, passing on costs, and in some cases raised prices without warning.

The NTS said its ongoing series of tax investigations into businesses that stoke price instability has confirmed a link between tax evasion and rising prices, and pledged to conduct a thorough investigation into the latest suspects in the interest of stabilizing living costs.

NTS Investigation Bureau Director Lee Seong-geul said the agency would "closely examine whether production costs cited as justification for price hikes are reasonable, whether transactions with business partners are conducted at arm's length, and how the owner's family accumulated their assets." He added that if evidence of criminal tax offenses — such as concealing profits through borrowed-name accounts — comes to light, the agency would "immediately convert the case to a criminal tax investigation and respond decisively."