OB Beer and Binggrae were assessed additional taxes of about 100 billion won and about 20 billion won, respectively, after signs emerged that they avoided taxes by inflating expenses through rebates and related-party transactions. Critics say a food monopoly structure has fueled both price increases and tax evasion.

The National Tax Service said on Feb. 9 it found 389.8 billion won in tax evasion by companies that raised prices while leveraging their "food monopoly" positions, and collected 178.5 billion won in additional taxes. The tax agency said this was confirmed after it completed tax audits of 53 companies found to have caused price instability.

The findings cover the first phase of a third round of tax audits on livelihoods that began in September last year. The tax agency is conducting additional audits of 50 sites and plans to launch a fourth round covering 14 targets, focusing ahead of the Lunar New Year holiday on industries directly tied to household grocery costs.

The tax agency said it detected signs that the companies increased profits by easily raising prices based on monopolistic or oligopolistic positions, while cutting taxable income by inflating expenses such as labor costs, commissions and advertising, or abusing transactions with related parties. Additional tax assessments were concentrated in three processed food manufacturers including OB Beer and Binggrae.

OB Beer was found to have paid rebates totaling about 110 billion won to retailers to expand market share and sales, and to have irregularly treated them as advertising expenses. It was also found to have shared profits by overpaying about 45 billion won in commissions while receiving services from a related company that handled raw material purchasing agency work. The tax agency viewed the distorted costs as a factor behind a 22.7 percent increase in product prices. The additional tax assessment for OB Beer is about 100 billion won.

Binggrae was found to have shifted profits by overpaying about 25 billion won in logistics costs to a related company that handled distribution for products such as ice cream. The tax agency said the excessive logistics burden led to a 25 percent increase in product prices, increasing the burden on consumers. The additional tax assessment is in the 20 billion won range. A ramen maker was also assessed an additional 30 billion won. The combined additional taxes for the three companies are about 150 billion won.

Tax evasion was also found in other industries outside processed foods in areas closely tied to daily life. Funeral services company C was found to have evaded about 97 percent of its annual sales each year over five years by falsely reporting expenses such as labor costs and commissions paid.

The tax agency said it will run the second and third rounds of livelihoods tax audits in parallel, while reviewing a total of 14 targets in the fourth round: 6 processed food manufacturers with monopolistic structures including price collusion, 5 agricultural and livestock product distributors and daily necessities manufacturers, and 3 franchise headquarters. The tax agency put the alleged evaded amount for the 14 at about 500 billion won.

Targets for the fourth round include Daehan Flour Mills, which was indicted after a prosecutors' investigation over collusion worth about 6 trillion won. The tax agency said it detected signs that Daehan Flour Mills raised product prices by 44.5 percent by deciding the order of price increases through a "ladder-climbing" method, and manipulated raw material purchase prices by exchanging false invoices with colluding companies to overstate costs. It also said the audit confirmed payments made for the honorary chairman's funeral expenses and for repairs and maintenance of luxury sports cars owned by the controlling shareholder. The alleged evaded amount is about 120 billion won.

The tax agency also said it detected signs that Sempio Foods raised selling prices for key products by 10.8 percent despite falling costs using its oligopolistic position, and that while operating profit last year rose by more than 300 percent to several tens of billions of won, it underreported it. Suspicions under review include shifting profits by purchasing packaging containers at high prices from a company owned by the controlling shareholder's children, or paying high rent to a company owned by those children. The additional taxes based on audit results are not yet final.