Kakao subsidiaries reportedly under investigation for tax evasion

Kakao is being probed for tax evasion, according to local media reports. To be more exact, the messaging and tech company’s key affiliates are the ones involved in this special tax investigation.

As per Korea Joongang Daily, South Korea’s National Tax Service (NTS) is carrying out an inquiry into a number of Kakao’s subsidiaries, including Kakao Games and Kakao Entertainment for a suspected tax evasion case. This information was first revealed by business insiders last week.

After the publication of the reports, neither Kakao nor its subsidiaries issued a statement to confirm or deny the news. It was said that the NTS sent the Seoul Regional Tax Office's Investigation Bureau 4 to check on the involved companies. This is the government’s team that manages special inquiries for the investigation.

This is the latest case where the subsidiaries of Kakao are being investigated for tax-related issues. It was only five months ago when the Seoul tax agency carried out a regular tax probe into the tech giant amid its aggressive expansion by setting up new businesses with its subsidiaries.

It was also noted that the authorities have started launching various investigations into Kakao since the unfortunate system crash that affected its services nationwide last month. The massive meltdown caused by a fire in its data center raised concerns over the country’s dependence on the company and sparked various probes into this matter

The Fair Trade Commission also started its investigation regarding allegations that Kakao engaged in anti-competitive practices. It will assess if fair trade violations among Kakao’s affiliates have indeed occurred.

In any case, Pulse News reported that there is a possibility for the National Tax Service to expand its investigations to other Kakao affiliates after the discovery of suspicious flows of funds during a regular tax probe of the Kakao’s HQ office in Jeju Island five months ago.

“As far as I know, there is an investigation underway, from whether the subsidiaries have done proper accounting in the process of their repaid growth to the possibility of tax evasion on overseas sales,” the source said.