Korea's National Tax Service has imposed 178.5 billion won ($126 million) in back taxes on liquor, ice cream, and instant noodle manufacturers that exploited their dominant market positions to extract excessive profits. Major flour and soy sauce companies previously indicted for price-fixing are also under investigation for understating income.
The NTS announced the interim results of its tax investigations into businesses harming consumer welfare on Wednesday.
From September last year through January, the agency conducted three rounds of investigations into 103 companies across monopolistic sectors, processed food manufacturing, daily necessities production, and agricultural and marine product distribution. Of 55 companies targeted in the first round, 53 investigations have concluded, resulting in 178.5 billion won in tax collections.
Food and beverage manufacturers—including liquor, frozen treats, and instant noodles—accounted for 85% of the total, or 150 billion won.
OB Beer was found to have paid approximately 110 billion won in rebates to retailers disguised as advertising contracts to boost market share and sales in an oligopolistic market. The brewer is also accused of distributing profits by overpaying about 45 billion won in fees to an affiliated company handling raw material procurement.
"The improperly paid rebates and excessive procurement fees were ultimately reflected in product prices, causing a 22.7% price increase," said Ahn Deok-soo, Director of the NTS Investigation Bureau.
Ice cream manufacturer Company A, whose products are popular among children, overpaid more than 25 billion won in logistics costs to funnel profits to an affiliated company. The NTS said the increased distribution costs led to a 25% price hike, adding to students' snack expenses.
An instant noodle manufacturer was also hit with 30 billion won in back taxes.
A funeral service company was caught evading taxes equivalent to approximately 97% of its annual revenue over five years by falsely reporting labor costs and service fees. The company raised its service charges by about 20% annually to inflate expenses.
The NTS has launched a fourth round of investigations targeting industries closely tied to consumer prices that exploit collusion or monopolistic structures—identified by the Fair Trade Commission and prosecutors—to raise prices excessively while evading taxes.
Daehan Flour was caught manipulating raw material purchase prices and overstating costs by exchanging false invoices with other cartel participants. Daehan Flour is one of six companies indicted by prosecutors on April 2 for participating in a flour price-fixing scheme worth 6 trillion won. The investigation found the companies colluded for years through methods including determining the order of price increases by drawing lots and dividing up regions and customers, ultimately raising product prices by 44.5%. The company also paid for the funeral expenses of its honorary chairman and covered repair and maintenance costs for luxury sports cars owned by the controlling shareholder.
Company B, which manufactures soy sauce, red pepper paste, and fermented seasonings, raised prices on major products by 10.8% by exploiting its oligopolistic position despite continued declines in international raw material prices. The NTS found the company improperly reduced reported income by purchasing packaging containers at inflated prices from a corporation owned by the controlling shareholder's children and paying excessive rent to another entity owned by the family.
"In the fourth round of investigations, we will conduct rigorous tax audits on companies that drive up grocery and daily necessity prices through price-fixing and monopolistic practices while evading legitimate taxes," Ahn said.