The National Tax Service is taking direct aim at the food industry and launching a large-scale tax audit. Many companies were found to have shifted the burden onto consumers by raising product prices excessively while citing higher raw material costs. A major coffee franchise with about 1,000 outlets is also said to be included among the audit targets.
They were found to have engaged in tax evasion by falsely purchasing materials and supplies from counterparties or by reporting that they paid fabricated processing labor costs to the owner family. A distributor of agricultural, livestock, and fisheries products that received false invoices and conducted undocumented transactions was also caught in a preliminary National Tax Service probe.
On the 25th, the National Tax Service said it will push tax audits on a total of 55 companies: ▲ 12 processed food manufacturers and sellers ▲ 12 distributors supplying agricultural, livestock, and fisheries products ▲ 14 restaurant franchise headquarters ▲ 17 event businesses such as weddings and funerals.
Processed food manufacturers and sellers are suspected of inflating material costs by buying materials and supplies at high prices from a related-party corporation established by the owner family or by pretending to have purchased them falsely. The National Tax Service noted that these companies underreported income and allotted profits to the related-party corporation. Cases were also uncovered in which the company covered the owner family's purchases of expensive apartments, real estate development, and even expenses related to the design and interior of their residence.
Distributors of agricultural, livestock, and fisheries products were found to have indications of reducing reported taxes by over-receiving invoices when purchasing such goods from small businesses, or by inflating purchase amounts by receiving false invoices without actual transactions of agricultural, livestock, and fisheries products. They exploited the fact that when dealing directly with farmers and fishers, they are not required to exchange transaction evidence such as invoices and cash receipts.
Among the restaurant franchises targeted for tax audits, signs were found of inflating reported purchase prices for food ingredients while omitting franchise fee revenue from reports. The companies under investigation over-received tax invoices for ingredients supplied to franchisees to inflate costs, and in some cases reported excessively by making it appear that the headquarters bore all advertising expenses that were jointly shared with franchisees.
The National Tax Service will also conduct tax audits on event businesses for weddings and funerals that reduced reported income through false expenses and fabricated processing labor costs and failed to report cash sales.
Min Ju-won, head of investigations at the National Tax Service, said, "We will rigorously vet tax evaders in sectors closely tied to the cost of living who excessively raise prices while shrinking income through cost inflation and evading taxes in opaque distribution processes," adding, "We will also conduct strict investigations into counterparties that helped inflate the costs of companies under investigation."
Min, the Director General, said, "For illegal transaction practices that undermine tax law order—such as undocumented transactions, the exchange of false tax invoices, and the use of accounts under borrowed names—we plan to carry out investigations using every available tool, including temporary seizure and financial tracing," adding, "We will continue to monitor and conduct tax verification on companies that use rising raw material costs as an excuse to excessively raise prices and shift the burden to consumers while underreporting taxes they are obliged to pay."