Kakao being investigated for tax evasion: local press reports

The interior of Kakao's office building in Pangyo, Gyeonggi [KAKAO]

Kakao is being investigated for tax evasion, according to local press reports.

Multiple Kakao subsidiaries, including Kakao Entertainment and Kakao Games, are currently under investigation by the National Tax Service (NTS), according to industry sources Thursday.

Neither Kakao Entertainment nor Kakao Games confirmed the media reports.

NTS reportedly deployed the Seoul Regional Tax Office's Investigation Bureau 4, a team that handles special probes, for the investigation.

The latest investigation into Kakao subsidiaries comes five months after the Seoul tax agency conducted a regular tax probe into Kakao.

Kakao has been aggressively branching out into new businesses with its subsidiaries.

Local authorities have been initiating multiple investigations into Kakao and its subsidiaries since the company went through a 127-hour-long service outage caused by a fire at a data center on October 15.

The massive meltdown led to rising concerns over the nation’s high dependence on a handful of big tech companies.

President Yoon Suk-yeol said on Oct. 17 that "if the market has been distorted due to monopoly and the company's service has become a nationwide infrastructure, then the state must take necessary measures for the good of the people.”

Kakao Entertainment, 73.6 percent owned by Kakao, is under the Fair Trade Commission investigation as well over allegations of anticompetitive practices on its Facebook page that posts K-pop content. The allegations suggest Kakao Entertainment ran a smear campaign against idols from other agencies while promoting its own.

On Friday, Kosdaq-listed Kakao Games share price fell 3.71 percent compared to the previous trading day to 42,850 won ($32.4), while the Kosdaq declined 0.63 percent that day. Kakao owns 41.01 percent of Kakao Games.

Kakao shares dipped 2.26 percent to 56,100 won.

BY JEONG JIN-HO, SHIN HA-NEE [shin.hanee@joongang.co.kr]