Profit-shifting multinationals are the latest NTS targets

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Profit-shifting multinationals are the latest NTS targets

 
Netflix and Delivery Hero, which acquired Baedal Minjok last year, are being investigated by the National Tax Service (NTS) for tax evasion as the authorities look into transfer pricing schemes and other methods used to shift profits.  
 
While the authority does not normally identify its targets, the two companies said that they are being scrutinized by the NTS.  
 
According to the service on Thursday, of the 43 current subjects of investigation, 21 are multinationals.
 
Despite making huge profits in the booming non-contact economy, the 21 multinationals have been transferring profits without properly paying their taxes. One of the methods utilized is the paying of huge management consulting fees by the Korean branch offices to the overseas headquarters. The Korean offices report losses after paying these fees and avoided corporate income taxes, the NTS claims.
 
Another method used is disguising royalty payments made to the foreign headquarters as general business income, thereby lowering the taxation on the payments.
 
Both Los Gatos, California-based Netflix and Berlin's Delivery Hero said while they could not comment on the investigation, they are fully cooperating.
 
The NTS has also found several luxury brands dodging taxes by raising the import prices paid in order to reduce profit and lower taxes.
 
It said it would take stern measure against those confirmed to be in violation, including penalties equal to 60 percent of the amount dodged. If the violations are found to be intentional, the cases might be referred to prosecutors for possible criminal prosecution.
 
"While every sector in our society has been focused on overcoming the Covid-19 economic crisis, including sharing the burden, several wealthy people have attempted offshore tax evasion by smuggling their income and wealth overseas either hiding them in secret accounts or inheritance through dubious means,” said Lim Kwang-hyun, the NTS investigation assistant commissioner. “Additionally, we have detected several multinational companies including online platforms and luxury brands, which have been enjoying prosperity recently, transferring massive profit made from Korea overseas without paying taxes.”
 
BY LEE HO-JEONG   [lee.hojeong@joongang.co.kr]

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