Tax agency puts Coupang under microscope

The National Tax Service (NTS) is conducting a special investigation on Korea’s e-commerce giant Coupang, according to industry sources Monday, prompting speculations over the nature of the probe.

Coupang acknowledged that the tax watchdog has been looking into its tax records but described it as “an audit in ordinary circumstances.”

The company also said the NTS did not seize or confiscate any data, as it would do when carrying out an investigation into suspicious activities or transactions.

Nevertheless, the sources remained doubtful about Coupang’s explanation for several reasons.

First, they pointed out that the probe has been led by the International Trade Investigation Bureau, which is responsible for investigating offshore tax evasion.

Such criminal activity refers to businesses and individuals deliberately underreporting or failing to report income or revenue earned to tax authorities and siphoning the corresponding amount of profit out of the country.

The sources also pointed out that cases of offshore tax evasion tend to involve tax havens and that Coupang is wholly owned by Coupang Inc., which is listed in New York and incorporated in Delaware.

A tax-free U.S. state, Delaware is also cited by some as one of the world’s biggest tax shelters.

“Under the circumstances, the NTS investigation is said to be centered on Coupang’s tax transactions in connection with Coupang Inc.,” a source said.

A tax audit on a business usually takes place once every four to five years, whereas the ongoing probe on Coupang was abrupt and unexpected, the sources noted.

Coupang expanded its presence fast in the conglomerate-dominated distribution industry after it was established in 2010.

It posted net losses for years due to massive infrastructure investments but turned to black for the first time in 2023.

It reported an annual operating profit of $473 million in 2023 and also posted $24.4 billion in sales, a notable 20 percent jump from the previous year.

Meanwhile, the company has been under several separate investigations by the Fair Trade Commission for alleged unfair business practices.