South Korea’s tax authorities have launched an industrywide tax evasion probe into local entertainment and nightclub businesses, fueled by scores of allegations surrounding K-pop star Seungri’s sex bribery scandal.

The National Tax Service said on March 22 it had launched a crackdown on 21 nightlife businesses suspected of evading taxes. The NTS is to cooperate with prosecutors on obtaining warrants for search and confiscation, it added. 

Though the NTS has yet to confirm, industry watchers say the crackdown is in line with the latest tax probe intoYG Entertainment -- whose headquarters and buildings were raided last week -- and two nightclubs involved in the scandal. YG Entertainment terminated its contract with Seungri earlier this month, following the main revelations of the scandal.

Authorities noted a pattern in tax evasion methods among such nightclub businesses, such as tapping regular employees as figureheads to act on behalf of the actual owners who remained behind the curtain. They repeatedly abused a cycle of tax delinquency and store closings, while using payment terminals registered for general restaurants and motels instead of entertainment establishments to evade taxes.

“We have been carrying out tax investigations on such businesses, but were experiencing difficulties in bringing actual owners to justice, (as they were hiding behind the curtain),” an NTS official said.

The Seoul Metropolitan Tax Service launched the probe on YG Entertainment last week on allegations it had declared smaller profits from artists’ overseas concerts and events while concealing assets in foreign countries for tax evasion. The headquarters and other main buildings in Seoul were raided by 100 investigators.

The K-pop agency was fined 3.5 billion won ($3.1 million) for corporate tax evasion after a routine tax probe in 2016.

Yang Min-suk, chief executive of YG Entertainment, said he will faithfully cooperate with relevant authorities in charge of investigations, but refused to elaborate on the firm’s position on the special tax probe.

Meanwhile, the NTS is also conducting a probe into Burning Sun Entertainment – which managed the controversial Burning Sun club where Seungri once held an executive position -- as well as the club Arena. 

Seungri stands accused of brokering sexual services for potential investors at Arena in Seoul in 2015 while preparing to open his own nightclub, Burning Sun.

By Jung Min-kyung  / The Korea Herald (mkjung@heraldcorp.com)