Yang Hyun Suk, the infamous chief executive officer of one of the biggest record companies in South Korea, YG Entertainment, may not be going through his best moment due to the revelation of huge tax fraud methods the company have been practicing since the early 2000.
Through 2019, MBC’s “Newsdesk”, one of the most relevant informatives on the country, has been shedding more light on the potential allegations of tax evasion Yang Hyun Suk and YG Entertainment were facing at the moment.
On March 21, “Newsdesk” reported on allegations that YG Entertainment and Yang Hyun Suk are under suspicion of tax evasion in relation to overseas performances. According to “Newsdesk,” YG Entertainment has earned approximately 300 billion won (approximately $265.7 million) in sales every year for the past three years, which also includes sales from world tour performances overseas by their label artists.
However, YG is under suspicion of underreporting their overseas concert earnings to the National Tax Service, with almost 100 investigators reportedly present on scene. The apparent method involves YG Entertainment reporting the earnings as their artists' individual income rather than earnings of the agency. As they would be reporting less earnings, the agency would also be paying less in taxes.
In addition to this already shocking revelations, on June 4, news outlet "Kukinews" reported that irregular transactions have occurred internally at Club NB, a famous and widespread club in Hongdae that is said to have ties with Yang Hyun Suk.
According to official documents, Yang Hyun Suk is not listed as an owner of the establishment. However, since the launch, the club has been distributing a large sum of cash to Yang Hyun Suk upon settling the profits. All of this sits on top of the recent allegations of the CEO involvement in **** mediations with Southeast Asian businessmen and adult entertainment workers at Club NB in 2014.
But he does not seem to content himself just by having strange ties with suspicious third parties clubs. It has been reported by various news agencies that the record producer registered his own clubs under ‘general restaurants’ rather than an ‘entertainment establishment’. While general restaurant’s pay 10% in taxes, entertainment establishments must pay a higher 20% tax.
He is not just a man heavily involved with tax fraud and illegal business, but also has been put into the spotlight by being accused of gambling overseas using the company's money and illegal trading of foreign currencies over the years.
At the end, on September 17, South Korea’s tax agency decided to levy tax penalties of 6 billion won ($5.04 million) on troubled YG Entertainment, according to industry sources. Not even a 1% of the amount evaded initially.
The tax amount is significantly higher than 3.5 billion won the entertainment company was charged during a regular tax audit in 2016, but the company avoided tax evasion changes, local reports said.
The decision by the National Tax Service comes six months after it launched a special investigation of the entertainment.
Although YG Entertainment stock numbers plummeted, some market watchers speculate that it is unlikely that the company will suffer financial distress from recent taxes or anticipated payback of 67 billion won because it has 46.6 billion won in cash reserves and cashable assets and 106 billion won worth short-term financial assets as of end-June. But they agreed that the on-going police investigations will continue to hurt investor sentiments and it is unlikely that its share price will recover anytime soon.
But now, I think is important to ask:
Where is the limit of the amount of illegal activity and tax fraud powerful businessmen like Yang Hyun Suk can commit without being really penalised. It's relevant to add that though nowadays the CEO has ceased active performance at the company, he, like all the other executives, haven't really being punished for their acts and keep on walking freely without their lifes being changed as much. So as a society who is always learning and adapting, how can the poor reaction capacity of the police and the Korean National Tax Service can disencourage future irregularities and enforce the law, when they are making it seem so easy to evade.
Sources:
https://www.soompi.comhttps://www.rollingstone.comhttp://m.theinvestor.co.kr
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